H. Rept. 110-210 - 110th Congress (2007-2008)
June 25, 2007, As Reported by the Education and Labor Committee

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House Report 110-210 - COLLEGE COST REDUCTION ACT OF 2007




[House Report 110-210]
[From the U.S. Government Printing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-210

======================================================================
 
                   COLLEGE COST REDUCTION ACT OF 2007

                                _______
                                

 June 25, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. George Miller of California, from the Committee on Education and 
                     Labor, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2669]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Education and Labor, to whom was referred 
the bill (H.R. 2669) to provide for reconciliation pursuant to 
section 601 of the concurrent resolution on the budget for 
fiscal year 2008, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited to as the ``College Cost 
Reduction Act of 2007''.
  (b) Table of Contents.--

Sec. 1. Short title; table of contents.
Sec. 2. References; effective date.

                   TITLE I--INVESTING IN STUDENT AID

         Part A--Increasing the Purchasing Power of Pell Grants

Sec. 101. Mandatory Pell Grant Increases.
Sec. 102. Support for working students.
Sec. 103. Simplified needs test and automatic zero improvements.
Sec. 104. Definitions.

              Part B--Making Student Loans More Affordable

Sec. 111. Interest rate reductions.
Sec. 112. Increases in loan limits.
Sec. 113. Reduction of lender special allowance payments.
Sec. 114. Elimination of exceptional performer status for lenders.
Sec. 115. Reduction of lender insurance percentage.
Sec. 116. Guaranty agency collection retention.
Sec. 117. Unit costs for account maintenance fees.
Sec. 118. Increased loan fees from lenders.
Sec. 119. Student loan information.
Sec. 120. Market-based determination of lender returns.

                 Part C--Rewarding Service in Repayment

Sec. 131. Loan forgiveness for service in areas of national need.
        ``Sec. 428K. Loan forgiveness for service in areas of national 
                        need.
Sec. 132. Income-contingent repayment for public sector employees.
Sec. 133. Income-based repayment.
        ``Sec. 493C. Income-based repayment.
Sec. 134. Definition of economic hardship.
Sec. 135. Deferrals.
Sec. 136. Maximum repayment period.
Sec. 137. Deferral of loan repayment following active duty.
        ``Sec. 484C. Deferral of loan repayment following active duty.
Sec. 138. Sense of the Congress; report.

              Part D--Sustaining the Perkins Loan Program

Sec. 141. Federal Perkins Loans.

                 TITLE II--REDUCING THE COST OF COLLEGE

Sec. 201. State commitment to affordable college education.
        ``Sec. 132. State commitment to affordable college education.
Sec. 202. Consumer information and public accountability in higher 
education.
        ``Sec. 131. Consumer information and public accountability in 
                        higher education.
Sec. 203. Incentives and rewards for low tuition.
        ``Sec. 401B. Incentives and rewards for low tuition.
Sec. 204. Cooperative education rewards for institutions that restrain 
tuition increases.

   ``TITLE VIII--COOPERATIVE EDUCATION REWARDS FOR INSTITUTIONS THAT 
                       RESTRAIN TUITION INCREASES

        ``Sec. 801. Definition of cooperative education.
        ``Sec. 802. Authorization of appropriations; reservations.
        ``Sec. 803. Grants for cooperative education.
        ``Sec. 804. Demonstration and innovation projects; training and 
                        resource centers; and research.

   TITLE III--ENSURING A HIGHLY QUALIFIED TEACHER IN EVERY CLASSROOM

                          Part A--TEACH Grants

Sec. 301. TEACH Grants.

                         ``Subpart 9--TEACH Grants

        ``Sec. 420L. Program established.
        ``Sec. 420M. Eligibility; applications.
        ``Sec. 420N. Definitions.
        ``Sec. 420O. Program period and funding.

                     Part B--Centers of Excellence

Sec. 311. Centers of excellence.

                    ``Part C--Centers of Excellence

        ``Sec. 231. Definitions.
        ``Sec. 232. Centers of excellence.
        ``Sec. 233. Appropriations.

         TITLE IV--LEVERAGING FUNDS TO INCREASE COLLEGE ACCESS

Part A--Strengthening Historically Black Colleges and Universities and 
                     Minority-Serving Institutions

Sec. 401. Investment in Historically Black Colleges and Universities 
and Minority-Serving Institution.

 ``Part I--Strengthening Historically Black Colleges and Universities 
                and Other Minority-Serving Institutions

        ``Sec. 499A. Investment in Historically Black Colleges and 
                        Universities and Other Minority-Serving 
                        Institution.

                Part B--College Access Challenge Grants

Sec. 411. College Access Challenge grants.

                          Part C--Upward Bound

Sec. 412. Upward Bound.

                     TITLE V--ADDITIONAL PROVISIONS

Sec. 501. Independent evaluation of distance education programs.
Sec. 502. Encouraging colleges and universities to ``go green''.

SEC. 2. REFERENCES; EFFECTIVE DATE.

  (a) References.--Except as otherwise expressly provided, whenever in 
this Act an amendment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Higher 
Education Act of 1965 (20 U.S.C. 1001 et seq.).
  (b) Effective Date.--Except as otherwise expressly provided therein, 
the amendments made by this Act shall be effective on October 1, 2007.

                   TITLE I--INVESTING IN STUDENT AID

         PART A--INCREASING THE PURCHASING POWER OF PELL GRANTS

SEC. 101. MANDATORY PELL GRANT INCREASES.

  (a) Extension of Authority.--Section 401(a) (20 U.S.C. 1070a(a)) is 
amended by striking ``fiscal year 2004'' and inserting ``fiscal year 
2013''.
  (b) Funding for Increases.--Section 401(b) (20 U.S.C. 1070a(b)) is 
amended by adding at the end the following new paragraph:
          ``(9) Additional funds.--
                  ``(A) In general.--There are authorized to be 
                appropriated, and there are appropriated, to carry out 
                subparagraph (B) of this paragraph (in addition to any 
                other amounts appropriated to carry out this section 
                and out of any money in the Treasury not otherwise 
                appropriated) the following amounts:
                          ``(i) $840,000,000 for fiscal year 2008;
                          ``(ii) $870,000,000 for fiscal year 2009;
                          ``(iii) $1,340,000,000 for fiscal year 2010;
                          ``(iv) $2,280,000,000 for fiscal year 2011;
                          ``(v) $2,350,000,000 for fiscal year 2012;
                          ``(vi) $2,400,000,000 for fiscal year 2013;
                          ``(vii) $2,450,000,000 for fiscal year 2014;
                          ``(viii) $2,510,000,000 for fiscal year 2015;
                          ``(ix) $2,550,000,000 for fiscal year 2016; 
                        and
                          ``(x) $2,570,000,000 for fiscal year 2017.
                  ``(B) Increase in federal pell grants.--The amounts 
                made available pursuant to subparagraph (A) of this 
                paragraph shall be used to increase the amount of the 
                maximum Pell Grant for which a student shall be 
                eligible during an award year, as specified in the last 
                enacted appropriation Act applicable to that award 
                year, by--
                          ``(i) $200 for each of the award years 2008-
                        2009 and 2009-2010;
                          ``(ii) $300 for award year 2010-2011; and
                          ``(iii) $500 for award year 2011-2012 and 
                        each subsequent award year.
                  ``(C) Use of fiscal year funds for award years.--The 
                amounts made available by subparagraph (A) for any 
                fiscal year shall be available and remain available for 
                use under subparagraph (B) for the award year that 
                begins in such fiscal year.''.
  (c)  Authorized Maximums.--Section 401(b)(2)(A) (20 U.S.C. 
1070a(b)(2)(A)) is amended to read as follows:
  ``(2)(A) The amount of the Federal Pell Grant for a student eligible 
under this part shall be--
          ``(i) $7,600 for academic year 2008-2009;
          ``(ii) $8,600 for academic year 2009-2010;
          ``(iii) $9,600 for academic year 2010-2011;
          ``(iv) $10,600 for academic year 2011-2012; and
          ``(v) $11,600 for academic year 2012-2013,
        less an amount equal to the amount determined to be the 
        expected family contribution with respect to that student for 
        that year.''.
  (d) Tuition Sensitivity.--
          (1) Amendment.--Section 401(b) (20 U.S.C. 1070a(b)) is 
        further amended--
                  (A) by striking paragraph (3); and
                  (B) by redesignating paragraphs (4) through (9) as 
                paragraphs (3) through (8), respectively.
          (2) Effective date.--The amendments made by paragraph (1) of 
        this subsection are effective on the date of enactment of this 
        Act.
  (e) Multiple Grants.--
          (1) Amendment.--Paragraph (5) of section 401(b) (as 
        redesignated by subsection (d)(1)(B)) is amended to read as 
        follows:
          ``(5) Year-round pell grants.--The Secretary is authorized, 
        for students enrolled in a baccalaureate degree, associate's 
        degree, or certificate program of study at an eligible 
        institution, to award such students not more than two Pell 
        grants during an award year to permit such students to 
        accelerate progress toward their degree or certificate 
        objectives by enrolling in courses for more than 2 semesters, 
        or 3 quarters, or the equivalent, in a given academic year.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall be effective July 1, 2009.
  (f) Academic Competitiveness Grants.--Section 401A (as amended by 
section 8003 of Public Law 109-171) is amended--
          (1) in subsection (c)(3)(A)(ii), by inserting ``, except as 
        part of a secondary school program of study'' before the 
        semicolon;
          (2) by redesignating subsection (g) as subsection (h); and
          (3) by inserting after subsection (f) the following new 
        subsection:
  ``(g) Determination of Academic Year.--Notwithstanding section 
481(a)(2), for the purpose of determining eligibility for a grant under 
this section, a student shall be considered to be enrolled or accepted 
for enrollment in the first, second, third, or fourth academic year of 
a program of undergraduate education based on the student's class 
standing, as determined by the institution of higher education at which 
the student is enrolled or accepted for enrollment.''.
  (g) Eligibility for Academic Competitiveness Grants.--Section 401A is 
further amended--
          (1) in subsection (c)--
                  (A) by striking ``full-time''; and
                  (B) by amending paragraph (1) to read as follows:
          ``(1) is an eligible student under section 484, including 
        being enrolled or accepted for enrollment in a degree, 
        certificate, or other eligible program leading to a recognized 
        educational credential at an institution of higher 
        education;''; and
          (2) in subsection (d), by adding at the end the following new 
        paragraph:
          ``(3) Adjustment for less than full-time enrollment.--A grant 
        awarded under this section to an eligible student who attends 
        an eligible institution on a less than full-time (but at least 
        half-time or more) basis shall be reduced in the same 
        proportion as would a Federal Pell Grant pursuant to section 
        401(b)(2)(B).''.

SEC. 102. SUPPORT FOR WORKING STUDENTS.

  (a) Dependent Students.--Subparagraph (D) of section 475(g)(2) (20 
U.S.C. 1087oo)(g)(2)(D)) is amended to read as follows:
                  ``(D) an income protection allowance of the following 
                amount (or a successor amount prescribed by the 
                Secretary under section 478)--
                          ``(i) for the 2009-2010 academic year, 
                        $3,750;
                          ``(ii) for the 2010-2011 academic year, 
                        $4,500;
                          ``(iii) for the 2011-2012 academic year, 
                        $5,250; and
                          ``(iv) for the 2012-2013 academic year, 
                        $6,000;''.
  (b) Independent Students Without Dependents Other Than a Spouse.--
Clause (iv) of section 476(b)(1)(A) (20 U.S.C. 1087pp(b)(1)(A)(iv)) is 
amended to read as follows:
                          ``(iv) an income protection allowance of the 
                        following amount (or a successor amount 
                        prescribed by the Secretary under section 
                        478)--
                                  ``(I) for single or separated 
                                students, or married students where 
                                both are enrolled pursuant to 
                                subsection (a)(2)--
                                          ``(aa) for the 2009-2010 
                                        academic year, $6,690;
                                          ``(bb) for the 2010-2011 
                                        academic year, $7,160;
                                          ``(cc) for the 2011-2012 
                                        academic year, $7,630; and
                                          ``(dd) for the 2012-2013 
                                        academic year, $8,090; and
                                  ``(II) for married students where 1 
                                is enrolled pursuant to subsection 
                                (a)(2)--
                                          ``(aa) for the 2009-2010 
                                        academic year, $10,720;
                                          ``(bb) for the 2010-2011 
                                        academic year, $11,470;
                                          ``(cc) for the 2011-2012 
                                        academic year, $12,220; and
                                          ``(dd) for the 2012-2013 
                                        academic year, $12,960;''.
  (c) Updated Tables and Amounts.--Section 478(b) (20 U.S.C. 1087rr(b)) 
is amended--
          (1) in paragraph (1)--
                  (A) by striking ``Revised tables.--For each'' and 
                inserting ``Revised tables.--
                  ``(A) In general.--For each'';
                  (B) in subparagraph (A) (as designated by 
                subparagraph (A)), in the third sentence--
                          (i) by striking ``preceding sentence'' and 
                        inserting ``subparagraph (A)''; and
                          (ii) by striking ``For the 2007-2008'' and 
                        inserting the following:
                  ``(B) Special rule for 2007-2008 academic year.--For 
                the 2007-2008''; and
                  (C) by adding at the end the following:
                  ``(C) Special rule for 2009-2010 through 2012-2013 
                academic years.--For the 2009-2010 academic year, and 
                for each of the 3 succeeding academic years, the 
                Secretary shall revise the tables in accordance with 
                this paragraph, except that, for the table in section 
                477(b)(4), the Secretary shall revise such table by 
                increasing the amounts contained in such table for the 
                preceding academic year by 10 percent.''; and
          (2) in paragraph (2), by striking ``shall be developed'' and 
        all that follows through the period at the end and inserting 
        ``shall be developed--
                  ``(A) for academic year 2008-2009, by increasing each 
                of the dollar amounts contained in such section as such 
                section was in effect on the day before the date of 
                enactment of the College Cost Reduction Act of 2007 by 
                a percentage equal to the estimated percentage increase 
                in the Consumer Price Index (as defined in section 
                478(f)) between December 2006 and the December next 
                preceding the beginning of such academic year, and 
                rounding the result to the nearest $10; and
                  ``(B) for each academic year after 2012-2013, by 
                increasing each of the dollar amounts contained in such 
                section for academic year 2012-2013 by a percentage 
                equal to the estimated percentage increase in the 
                Consumer Price Index (as defined in section 478(f)) 
                between December 2011 and the December next preceding 
                the beginning of such academic year, and rounding the 
                result to the nearest $10.''.
  (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on October 1, 2008, and the amendment made by 
subsection (c) shall take effect on July 1, 2008.

SEC. 103. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO IMPROVEMENTS.

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

SEC. 104. DEFINITIONS.

  (a) Total Income.--Section 480(a)(2) (20 U.S.C. 1087vv(a)(2)) is 
amended--
          (1) by striking ``and no portion'' and inserting ``no 
        portion''; and
          (2) by inserting ``and no distribution from any qualified 
        education benefit described in subsection (f)(3) that is not 
        subject to Federal income tax,'' after ``1986,''.
  (b) Untaxed Income and Benefits.--Section 480(b) (20 U.S.C. 
1087vv(b)) is amended to read as follows:
  ``(b) Untaxed Income and Benefits.--
          ``(1) The term `untaxed income and benefits' means--
                  ``(A) child support received;
                  ``(B) workman's compensation;
                  ``(C) veteran's benefits such as death pension, 
                dependency, and indemnity compensation, but excluding 
                veterans' education benefits as defined in subsection 
                (c);
                  ``(D) interest on tax-free bonds;
                  ``(E) housing, food, and other allowances (excluding 
                rent subsidies for low-income housing) for military, 
                clergy, and others (including cash payments and cash 
                value of benefits);
                  ``(F) cash support or any money paid on the student`s 
                behalf, except, for dependent students, funds provided 
                by the student's parents;
                  ``(G) untaxed portion of pensions;
                  ``(H) payments to individual retirement accounts and 
                Keogh accounts excluded from income for Federal income 
                tax purposes; and
                  ``(I) any other untaxed income and benefits, such as 
                Black Lung Benefits, Refugee Assistance, railroad 
                retirement benefits, or Job Training Partnership Act 
                noneducational benefits or benefits received through 
                participation in employment and training activities 
                under title I of the Workforce Investment Act of 1998 
                (29 U.S.C. 2801 et seq.).
          ``(2) The term `untaxed income and benefits' shall not 
        include the amount of additional child tax credit claimed for 
        Federal income tax purposes.''.
  (c) Assets.--Section 480(f) (20 U.S.C. 1087vv(f)) is amended--
          (1) in paragraph (3), by striking ``shall not be considered 
        an asset of a student for purposes of section 475'' and 
        inserting ``shall be considered an asset of the parent for 
        purposes of section 475'';
          (2) by redesignating paragraphs (4) and (5) as paragraphs (5) 
        and (6), respectively; and
          (3) by inserting after paragraph (3) the following:
          ``(4) A qualified education benefit shall be considered an 
        asset of the student for purposes of section 476 and 477.''.
  (d) Other Financial Assistance.--Section 480(j)(2) (20 U.S.C. 
1087vv(j)(2)) is amended by inserting ``, or a distribution that is not 
includable in gross income under section 529 of such Code, under 
another prepaid tuition plan offered by a State, or under a Coverdell 
education savings account under section 530 of such Code,'' after 
``1986''.
  (e) Effective Date.--The amendments made by this section shall be 
effective on July 1, 2009.

              PART B--MAKING STUDENT LOANS MORE AFFORDABLE

SEC. 111. INTEREST RATE REDUCTIONS.

  (a) FFEL Interest Rates.--
          (1) Section 427A(l) (20 U.S.C. 1077a(l)) is amended by adding 
        at the end the following new paragraph:
          ``(4) Reduced rates for undergraduate subsidized loans.--
        Notwithstanding subsection (h) and paragraph (1) of this 
        subsection, with respect to any loan to an undergraduate 
        student made, insured, or guaranteed under this part (other 
        than a loan made pursuant to section 428B, 428C, or 428H) for 
        which the first disbursement is made on or after July 1, 2006, 
        and before July 1, 2013, the applicable rate of interest shall 
        be as follows:
                  ``(A) For a loan for which the first disbursement is 
                made on or after July 1, 2006, and before July 1, 2008, 
                6.80 percent on the unpaid principal balance of the 
                loan.
                  ``(B) For a loan for which the first disbursement is 
                made on or after July 1, 2008, and before July 1, 2009, 
                6.12 percent on the unpaid principal balance of the 
                loan.
                  ``(C) For a loan for which the first disbursement is 
                made on or after July 1, 2009, and before July 1, 2010, 
                5.44 percent on the unpaid principal balance of the 
                loan.
                  ``(D) For a loan for which the first disbursement is 
                made on or after July 1, 2010, and before July 1, 2011, 
                4.76 percent on the unpaid principal balance of the 
                loan.
                  ``(E) For a loan for which the first disbursement is 
                made on or after July 1, 2011, and before July 1, 2012, 
                4.08 percent on the unpaid principal balance of the 
                loan.
                  ``(F) For a loan for which the first disbursement is 
                made on or after July 1, 2012 and before July 1, 2013, 
                3.40 percent on the unpaid principal balance of the 
                loan.''.
          (2) Special allowance cross reference.--Section 
        438(b)(2)(I)(ii)(II) (20 U.S.C. 1086(b)(2)(I)(ii)(II)) is 
        amended by striking ``section 427A(l)(1)'' and inserting 
        ``section 427A(l)(1) or (l)(4)''.
  (b) Direct Loan Interest Rates.--Section 455(b)(7) (20 U.S.C. 
1087e(b)(7)) is amended by adding at the end the following new 
subparagraph:
                  ``(D) Reduced rates for undergraduate fdsl.--
                Notwithstanding the preceding paragraphs of this 
                subsection, for Federal Direct Stafford Loans made to 
                undergraduate students for which the first disbursement 
                is made on or after July 1, 2006, and before July 1, 
                2013, the applicable rate of interest shall be as 
                follows:
                          ``(i) For a loan for which the first 
                        disbursement is made on or after July 1, 2006, 
                        and before July 1, 2008, 6.80 percent on the 
                        unpaid principal balance of the loan.
                          ``(ii) For a loan for which the first 
                        disbursement is made on or after July 1, 2008, 
                        and before July 1, 2009, 6.12 percent on the 
                        unpaid principal balance of the loan.
                          ``(iii) For a loan for which the first 
                        disbursement is made on or after July 1, 2009, 
                        and before July 1, 2010, 5.44 percent on the 
                        unpaid principal balance of the loan.
                          ``(iv) For a loan for which the first 
                        disbursement is made on or after July 1, 2010, 
                        and before July 1, 2011, 4.76 percent on the 
                        unpaid principal balance of the loan.
                          ``(v) For a loan for which the first 
                        disbursement is made on or after July 1, 2011, 
                        and before July 1, 2012, 4.08 percent on the 
                        unpaid principal balance of the loan.
                          ``(vi) For a loan for which the first 
                        disbursement is made on or after July 1, 2012, 
                        and before July 1, 2013, 3.40 percent on the 
                        unpaid principal balance of the loan.''.

SEC. 112. INCREASES IN LOAN LIMITS.

  (a) Increase in Third and Subsequent Year Limits.--
          (1) Federal insurance limits.--Section 425(a)(1)(A)(iii) (20 
        U.S.C. 1075(a)(1)(A)(iii)) is amended by striking ``$5,500'' 
        and inserting ``$7,500''.
          (2) Guaranty limits.--Section 428(b)(1)(A)(iii)(I) (20 U.S.C. 
        1078(b)(1)(A)(iii)(I)) is amended by striking ``$5,500'' and 
        inserting ``$7,500''.
  (b) Increase in Aggregate Limits.--
          (1) Federal insurance limits.--Section 425(a)(2)(A) (20 
        U.S.C. 1075(a)(2)(A)(i)) is amended--
                  (A) in clause (i), by striking ``$23,000'' and 
                inserting ``$30,500''; and
                  (B) in clause (ii), by striking ``$65,500'' and 
                inserting ``$73,000''.
          (2) Guaranty limits.--Section 428(b)(1)(B) (20 U.S.C. 
        1078(b)(1)(A)(iii)(I)) is amended--
                  (A) in clause (i), by striking ``$23,000'' and 
                inserting ``$30,500''; and
                  (B) in clause (ii), by striking ``$65,500'' and 
                inserting ``$73,000''.
  (c) Effective Date.--The amendments made by this section shall be 
effective July 1, 2008.

SEC. 113. REDUCTION OF LENDER SPECIAL ALLOWANCE PAYMENTS.

  Section 438(b)(2)(I) (20 U.S.C. 1087-1(b)(2)(I)) is amended--
          (1) in clause (i), by striking ``clauses (ii), (iii), and 
        (iv)'' and inserting ``the following clauses'';
          (2) in clause (v)(III), by striking ``clauses (ii), (iii), 
        and (iv)'' and inserting ``clauses (ii), (iii), (iv), and 
        (vi)''; and
          (3) by adding at the end the following new clause:
                          ``(vi) Reduction for loans on or after 
                        october 1, 2007.--With respect to a loan on 
                        which the applicable interest rate is 
                        determined under section 427A(l), the 
                        percentage to be added under clause (i)(III) in 
                        computing the special allowance payment 
                        pursuant to this subparagraph shall be the 
                        following:
                                  ``(I) In general and plus loans.--
                                1.79 percent in the case of a loan 
                                described in clause (i) or (iii) for 
                                which the first disbursement of 
                                principal is made on or after October 
                                1, 2007.
                                  ``(II) In school and grace period.--
                                1.19 percent in the case of a loan 
                                described in clause (ii)(II) for which 
                                the first disbursement of principal is 
                                made on or after October 1, 2007.
                                  ``(III) Consolidation loans.--2.09 
                                percent in the case of a loan described 
                                in clause (iv) for which the first 
                                disbursement of principal is made on or 
                                after October 1, 2007.''.

SEC. 114. ELIMINATION OF EXCEPTIONAL PERFORMER STATUS FOR LENDERS.

  (a) Elimination of Status.--Part B of title IV (20 U.S.C. 1071 et 
seq.) is amended by striking section 428I (20 U.S.C. 1078-9).
  (b) Conforming Amendments.--Part B of title IV is further amended--
          (1) in section 428(c)(1) (20 U.S.C. 1078(c)(1))--
                  (A) by striking subparagraph (D); and
                  (B) by redesignating subparagraphs (E) through (H) as 
                subparagraphs (D) through (G), respectively; and
          (2) in section 438(b)(5) (20 U.S.C. 1087-1(b)(5)), by 
        striking the matter following subparagraph (B).

SEC. 115. REDUCTION OF LENDER INSURANCE PERCENTAGE.

  (a) Amendment.--Subparagraph (G) of section 428(b)(1) (20 U.S.C. 
1078(b)(1)(G)) is amended to read as follows:
                  ``(G) insures 95 percent of the unpaid principal of 
                loans insured under the program, except that--
                          ``(i) such program shall insure 100 percent 
                        of the unpaid principal of loans made with 
                        funds advanced pursuant to section 428(j) or 
                        439(q); and
                          ``(ii) notwithstanding the preceding 
                        provisions of this subparagraph, such program 
                        shall insure 100 percent of the unpaid 
                        principal amount of exempt claims as defined in 
                        subsection (c)(1)(G);''.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect with respect to loans made on or after October 1, 2007.

SEC. 116. GUARANTY AGENCY COLLECTION RETENTION.

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

SEC. 117. UNIT COSTS FOR ACCOUNT MAINTENANCE FEES.

  Section 458(b) (20 U.S.C. 1087h(b)) is amended--
          (1) by striking ``Account'' and inserting the following:
          ``(1) For fiscal years 2006 and 2007.--For fiscal years 2006 
        and 2007, account''; and
          (2) by adding at the end the following new paragraph:
          ``(2) For fiscal year 2008 and succeeding fiscal years.--
                  ``(A) Unit cost basis.--For fiscal year 2008 and each 
                succeeding fiscal year, the Secretary shall calculate 
                the account maintenance fees payable to guaranty 
                agencies under subsection (a)(3), on a per-loan cost 
                basis in accordance with subparagraph (B) of this 
                paragraph.
                  ``(B) Determinations.--To determine the amount that 
                shall be paid under subsection (a)(3) per outstanding 
                loan guaranteed by a guaranty agency for fiscal year 
                2008 and succeeding fiscal years, the Secretary shall--
                          ``(i) establish the per-loan cost basis 
                        amount by--
                                  ``(I) dividing the total amount of 
                                account maintenance fees paid under 
                                subsection (a)(3) in fiscal year 2006, 
                                by
                                  ``(II) the number of loans under part 
                                B that were outstanding in that fiscal 
                                year; and
                          ``(ii) determine on October 1 of fiscal year 
                        2008 and each subsequent fiscal year, and pay 
                        to each guaranty agency, an amount equal to the 
                        product of the number of loans under part B 
                        that are outstanding on October 1 of that 
                        fiscal year and insured by that guaranty 
                        agency, multiplied by--
                                  ``(I) the amount determined under 
                                clause (i); increased by
                                  ``(II) a percentage equal to the 
                                percentage increase in the GDP price 
                                index (as determined by the Bureau of 
                                Labor Statistics of the Department of 
                                Labor) between the calendar quarter 
                                ending on June 30, 2006, and the 
                                calendar quarter ending on the June 30 
                                preceding such October 1 of such fiscal 
                                year.''.

SEC. 118. INCREASED LOAN FEES FROM LENDERS.

  Paragraph (2) of section 438(d) (20 U.S.C. 1087-1(d)(2)) is amended 
to read as follows:
          ``(2) Amount of loan fees.--
                  ``(A) Amount.--The amount of the loan fee which shall 
                be deducted under paragraph (1), but which may not be 
                collected from the borrower, shall be equal to--
                          ``(i) except as provided in clauses (ii) and 
                        (iii), 0.50 percent of the principal amount of 
                        the loan with respect to any loan under this 
                        part for which the first disbursement was made 
                        on or after October 1, 1993;
                          ``(ii) 1.0 percent of the principal amount of 
                        the loan with respect to any loan under this 
                        part for which the first disbursement was made 
                        on or after October 1, 2007, that is held by 
                        any holder other than a holder described in 
                        subclause (I) or (II) of clause (iii); and
                          ``(iii) 0.0 percent of the principal amount 
                        of the loan with respect to any loan under this 
                        part for which the first disbursement was made 
                        on or after October 1, 2007, that is held by--
                                  ``(I) any holder that, together with 
                                its affiliated holders, is designated 
                                by the Secretary as a small lender 
                                under subparagraph (B); or
                                  ``(II) any holder that--
                                          ``(aa) is a unit of State or 
                                        local government or a nonprofit 
                                        private entity; and
                                          ``(bb) is not owned in whole 
                                        or in part by, or controlled or 
                                        operated by, or otherwise 
                                        affiliated with, a for-profit 
                                        entity.
                  ``(B) Designation of small lenders.--In determining 
                which holders of eligible loans qualify as small 
                lenders for purposes of subparagraph (A)(iii)(I), the 
                Secretary shall, using the most recently available data 
                with respect to the total principal amount of eligible 
                loans held by holders--
                          ``(i) rank all holders of eligible loans 
                        (combined with their affiliated holders) in 
                        descending order by total principal amount of 
                        eligible loans held;
                          ``(ii) calculate the total principal amount 
                        of eligible loans held by all holders; and
                          ``(iii) identify the subset of consecutively 
                        ranked holders under clause (i), starting with 
                        the lowest ranked holder, that together hold a 
                        total principal amount of such loans equal to 
                        15 percent of the total amount calculated under 
                        clause (ii), but excluding the holder, if any, 
                        whose holdings when added cause the total 
                        holdings of the subset to equal but not exceed 
                        such 15 percent of such total amount 
                        calculated; and
                          ``(iv) designate as small lenders any holder 
                        identified as a member of the subset under 
                        clause (iii).''.

SEC. 119. STUDENT LOAN INFORMATION.

  Section 428(k) (20 U.S.C. 1078(k)) is amended by adding at the end 
the following new paragraph:
          ``(4) Student loan information.--
                  ``(A) Notwithstanding any other provision of law or 
                regulation, a lender, secondary market, holder, or 
                guaranty agency shall provide, free of charge and in a 
                timely and effective manner, any student loan 
                information maintained by that entity that is requested 
                by an institution of higher education or any third-
                party servicer (as defined in section 481(c)) working 
                on behalf of that institution to prevent student loan 
                defaults.
                  ``(B) An institution and any third-party servicer 
                obtaining access to information under subparagraph (A) 
                shall safeguard that information in order to prevent 
                potential abuses of that information, including 
                identity theft.
                  ``(C) Any third party servicer that obtains 
                information under this paragraph--
                          ``(i) shall only use the information in a 
                        manner directly related to the default 
                        prevention work the servicer is performing on 
                        behalf of the institution of higher education; 
                        and
                          ``(ii) shall be subject to any regulations 
                        established by the Secretary pursuant to 
                        section 432 concerning the misuse of such 
                        information, including any penalties for such 
                        misuse.''.

SEC. 120. MARKET-BASED DETERMINATION OF LENDER RETURNS.

  (a) Joint Planning Study to Select Auction Mechanisms for Testing.--
          (1) Planning study.--The Secretaries of Education and 
        Treasury jointly shall conduct a planning study, in 
        consultation with the Office of Management and Budget, the 
        Congressional Budget Office, the General Accounting Office, and 
        other individuals and entities the Secretaries determines 
        appropriate, to--
                  (A) examine the matters described in paragraph (2) in 
                order to determine which market-based mechanisms for 
                determining lender returns on loans made, insured, or 
                guaranteed under part B of title IV of the Higher 
                Education Act of 1965 (20 U.S.C. 1071 et seq.) shall be 
                tested under the pilot programs described in subsection 
                (c); and
                  (B) determine what related administrative and other 
                changes will be required in order to ensure that high-
                quality services are provided under a successful 
                implementation of market-based determinations of lender 
                returns for all loans made, insured, or guaranteed 
                under such part.
          (2) Matters examined.--The planning study under this 
        subsection shall examine--
                  (A) whether it is most appropriate to auction 
                existing loans under part B of title IV of such Act, to 
                auction the rights to originate loans under such part, 
                or whether the sale of securities backed by federally-
                owned student loan assets originated by banks acting as 
                agents of the Federal Government would provide the most 
                efficient market-based alternative;
                  (B) matters related to efficient financial 
                organization of any auctions or sales of loans under 
                such part, including how loans and origination rights 
                are bundled, the capital structure of any 
                securitization plan, and issues related to servicing; 
                and
                  (C) how to ensure that statutory, regulatory, and 
                administrative requirements do not impede separate 
                management and ownership of loans or assets backed by 
                loans under part B of title IV of such Act.
          (3) Mechanisms.--In determining which market-based mechanisms 
        are the most promising models to test the pilot programs under 
        subsection (b), the planning study shall take into account 
        whether a particular market-based mechanism will--
                  (A) ensure loan availability under part B of title IV 
                of such Act to all eligible students at all 
                participating institutions;
                  (B) minimize administrative complexity for borrowers, 
                institutions, lenders, and the Federal Government; and
                  (C) reduce Federal costs if used on a program-wide 
                basis.
          (4) Report.--A report on the results of the planning study, 
        together with a plan for implementation of one or more pilot 
        programs using promising market-based approaches for 
        determining lender returns, shall be transmitted to Congress 
        not later than 6 months after the date of enactment of this 
        Act.
  (b) Pilot Programs to Be Tested.--
          (1) Authorization.--
                  (A) In general.--Notwithstanding any other provision 
                of law, after the report described in subsection (a)(4) 
                is transmitted to Congress, the Secretary of Education 
                shall, in consultation with the Secretary of the 
                Treasury, begin preparations necessary to carry out 
                pilot programs meeting the requirements of this 
                subsection in accordance with the implementation plan 
                included in such report.
                  (B) Implementation date.--The Secretary of Education 
                shall commence implementation of the pilot programs 
                under this subsection not earlier than July 1, 2008.
                  (C) Duration and loan volume.--The pilot programs 
                under this subsection shall be not more than two 
                academic years in duration, and the Secretary of 
                Education may use the pilot programs to determining the 
                lender returns for not more than--
                          (i) 10 percent of the annual loan volume 
                        under part B of title IV of the Higher 
                        Education Act of 1965 during the first year of 
                        the pilot programs under this subsection; and
                          (ii) 20 percent of the annual loan volume 
                        under part B of title IV of such Act during the 
                        second year of the pilot programs under this 
                        subsection.
          (2) Voluntary participation.--
                  (A) Participation in any auction-based pilot program 
                under this subsection shall be voluntary for eligible 
                institutions and eligible lenders participating under 
                part B of title IV of such Act prior to July 1, 2006.
                  (B) All savings to the United States Treasury 
                generated by such auctions shall be distributed to 
                institutions participating under this subsection on a 
                basis proportionate to loan volume under such part for 
                supplemental, need-based financial aid, except that an 
                institution that is operating as an eligible lender 
                under section 435(d)(2) of such Act shall not be 
                eligible for any such distribution.
          (3) Independent evaluation.--The Government Accountability 
        Office shall conduct an independent evaluation of the pilot 
        programs under this subsection, which evaluation shall be 
        completed, and the results of such submitted to the Secretary 
        of Education, the Secretary of the Treasury, and Congress, not 
        later than 120 days after the termination of such pilot 
        programs.
  (c) Program-Wide Implementation.--Notwithstanding any other provision 
of part B of title IV of the Higher Education Act of 1965, for the 
first academic year beginning not less than 120 days after the 
independent evaluation described in subsection (b)(3) has been 
transmitted to Congress, and succeeding academic years, the Secretary 
of Education is authorized to implement for all loans made under such 
part, a program-wide, market-based system to determine returns to all 
lenders as the Secretary of Education determines appropriate, provided 
that--
          (1) the Secretary of Education, in consultation with the 
        Secretary of the Treasury, has certified that the auction-based 
        system that the Secretary of Education intends to implement on 
        a program-wide basis would--
                  (A) ensure loan availability under such part to all 
                eligible students at all participating institutions;
                  (B) minimize administrative complexity for borrowers, 
                institutions, lenders, and the Federal Government, 
                including the enhancement of the modernization of the 
                student financial aid system; and
                  (C) reduce Federal costs when used on a program-wide 
                basis; and
          (2) the Secretary of Education has notified Congress of the 
        Secretary's intent to implement a program-wide auction based 
        system, and has provided a description of the structure of such 
        auction-based system, at least 120 days before implementing 
        such system.
  (d) Consultation.--
          (1) In general.--As part of the planning study, pilot 
        programs, and program-wide implementation phases described in 
        this section, the Secretary of Education shall consult with 
        representatives of investment banks, ratings agencies, lenders, 
        institutions of higher education, and students, as well as 
        individuals or other entities with pertinent technical 
        expertise. The Secretary of Education shall engage in such 
        consultations using such methods as, and to the extent that, 
        the Secretary determines appropriate to the time constraints 
        associated with the study, programs, and implementation.
          (2) Services of other federal agencies.--In carrying out the 
        planning study and pilot programs described in this section, 
        the Secretary of Education may use, on a reimbursable basis, 
        the services (including procurement authorities and services), 
        equipment, personnel, and facilities of other agencies and 
        instrumentalities of the Federal Government.

                 PART C--REWARDING SERVICE IN REPAYMENT

SEC. 131. LOAN FORGIVENESS FOR SERVICE IN AREAS OF NATIONAL NEED.

  Section 428K (20 U.S.C. 1078-11) is amended to read as follows:

``SEC. 428K. LOAN FORGIVENESS FOR SERVICE IN AREAS OF NATIONAL NEED.

  ``(a) Program Authorized.--
          ``(1) Loan forgiveness authorized.--The Secretary shall 
        forgive, in accordance with this section, the student loan 
        obligation of a borrower in the amount specified in subsection 
        (c), for any new borrower after the date of enactment of the 
        College Cost Reduction Act of 2007, who--
                  ``(A) is employed full-time in an area of national 
                need described in subsection (b); and
                  ``(B) is not in default on a loan for which the 
                borrower seeks forgiveness.
          ``(2) Method of loan forgiveness.--To provide loan 
        forgiveness under paragraph (1), the Secretary is authorized to 
        carry out a program--
                  ``(A) through the holder of the loan, to assume the 
                obligation to repay a qualified loan amount for a loan 
                made, insured, or guaranteed under this part; and
                  ``(B) to cancel a qualified loan amount for a loan 
                made under part D of this title.
          ``(3) Regulations.--The Secretary is authorized to issue such 
        regulations as may be necessary to carry out the provisions of 
        this section.
  ``(b) Areas of National Need.--For purposes of this section, an 
individual shall be treated as employed in an area of national need if 
the individual is employed full-time as any of the following:
          ``(1) Early childhood educators.--An individual who is 
        employed as an early childhood educator in an eligible 
        preschool program or eligible early childhood education program 
        in a low-income community, and who is involved directly in the 
        care, development, and education of infants, toddlers, or young 
        children age 5 and under.
          ``(2) Nurses.--An individual who is employed--
                  ``(A) as a nurse in a clinical setting; or
                  ``(B) as a member of the nursing faculty at an 
                accredited school of nursing (as those terms are 
                defined in section 801 of the Public Health Service Act 
                (42 U.S.C. 296)).
          ``(3) Foreign language specialists.--An individual who has 
        obtained a baccalaureate degree in a critical foreign language 
        and is employed--
                  ``(A) in an elementary or secondary school as a 
                teacher of a critical foreign language; or
                  ``(B) in an agency of the United States Government in 
                a position that regularly requires the use of such 
                critical foreign language.
          ``(4) Librarians.--An individual who is employed as a 
        librarian in--
                  ``(A) a public library that serves a geographic area 
                within which the public schools have a combined average 
                of 30 percent or more of their total student 
                enrollments composed of children counted under section 
                1113(a)(5) of the Elementary and Secondary Education 
                Act of 1965; or
                  ``(B) an 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 
                title I of the Elementary and Secondary Education Act 
                of 1965, 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 educational agency of the State in which the 
                school is located) to be a school in which the 
                enrollment of children counted under section 1113(a)(5) 
                of the Elementary and Secondary Education Act of 1965 
                exceeds 30 percent of the total enrollment of that 
                school.
          ``(5) Highly qualified teachers: bilingual education and low-
        income communities.--An individual who--
                  ``(A) is highly qualified as such term is defined in 
                section 9101 of the Elementary and Secondary Education 
                Act of 1965; and
                  ``(B)(i) is employed as a full-time teacher of 
                bilingual education; or
                  ``(ii) is employed as a teacher in a public or 
                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 title I of the Elementary and Secondary Education 
                Act of 1965, 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 educational agency of the 
                State in which the school is located) to be a school in 
                which the enrollment of children counted under section 
                1113(a)(5) of the Elementary and Secondary Education 
                Act of 1965 exceeds 40 percent of the total enrollment 
                of that school.
          ``(6) Child welfare workers.--An individual who--
                  ``(A) has obtained a degree in social work or a 
                related field with a focus on serving children and 
                families; and
                  ``(B) is employed in public or private child welfare 
                services.
          ``(7) Speech-language pathologists.--An individual who is a 
        speech-language pathologist, who is employed in an eligible 
        preschool program or an elementary or secondary school, and who 
        has, at a minimum, a graduate degree in speech-language 
        pathology, or communication sciences and disorders.
          ``(8) National service.--An individual who is engaged as a 
        participant in a project under the National and Community 
        Service Act of 1990 (as such terms are defined in section 101 
        of such Act (42 U.S.C. 12511)).
          ``(9) Public sector employees.--An individual who is employed 
        in public safety (including as a first responder, firefighter, 
        police officer, or other law enforcement or public safety 
        officer), emergency management (including as an emergency 
        medical technician), public health, or public interest legal 
        services (including prosecution or public defense).
  ``(c) Qualified Loan Amount.--At the end of each school, academic, or 
calendar year of full-time employment in an area of national need 
described in subsection (b), not to exceed 5 years, the Secretary shall 
forgive not more than $1,000 of the student loan obligation of a 
borrower that is outstanding after the completion of each such school, 
academic, or calendar year of employment, as appropriate, not to exceed 
$5,000 in the aggregate for any borrower.
  ``(d) Construction.--Nothing in this section shall be construed to 
authorize the refunding of any repayment of a loan.
  ``(e) Segal Americorps Education Award and National Service Award 
Recipients.--A student borrower who qualifies for the maximum education 
award under subtitle D of title I of the National and Community Service 
Act of 1990 (42 U.S.C. 12601 et seq.) shall receive under this section 
the amount, if any, by which the maximum benefit available under this 
section exceeds the maximum education award available under such 
subtitle.
  ``(f) Ineligibility for Double Benefits.--No borrower may receive a 
reduction of loan obligations under both this section and section 428J 
or 460.
  ``(g) Definitions.--In this section:
          ``(1) Critical foreign language.--The term `critical foreign 
        language' includes the languages of Arabic, Korean, Japanese, 
        Chinese, Pashto, Persian-Farsi, Serbian-Croatian, Russian, 
        Portuguese, and any other language identified by the Secretary 
        of Education, in consultation with the Defense Language 
        Institute, the Foreign Service Institute, and the National 
        Security Education Program, as a critical foreign language 
        need.
          ``(2) Early childhood educator.--The term `early childhood 
        educator' means an early childhood educator who works directly 
        with children in an eligible preschool program or eligible 
        early childhood education program who has completed a 
        baccalaureate or advanced degree in early childhood 
        development, early childhood education, or in a field related 
        to early childhood education.
          ``(3) Eligible preschool program.--The term `eligible 
        preschool program' means a program that provides for the care, 
        development, and education of infants, toddlers, or young 
        children age 5 and under, meets any applicable State or local 
        government licensing, certification, approval, and registration 
        requirements, and is operated by--
                  ``(A) a public or private school that is supported, 
                sponsored, supervised, or administered by a local 
                educational agency;
                  ``(B) a Head Start agency serving as a grantee 
                designated under the Head Start Act (42 U.S.C. 9831 et 
                seq.);
                  ``(C) a nonprofit or community based organization; or
                  ``(D) a child care program, including a home.
          ``(4) Eligible early childhood education program.--The term 
        `eligible early childhood education program' means--
                  ``(A) a family child care program, center-based child 
                care program, State prekindergarten program, school 
                program, or other out-of-home early childhood 
                development care program, that--
                          ``(i) is licensed or regulated by the State; 
                        and
                          ``(ii) serves 2 or more unrelated children 
                        who are not old enough to attend kindergarten;
                  ``(B) a Head Start Program carried out under the Head 
                Start Act (42 U.S.C. 9831 et seq.); or
                  ``(C) an Early Head Start Program carried out under 
                section 645A of the Head Start Act (42 U.S.C. 9840a).
          ``(5) Low-income community.--In this subsection, the term 
        `low-income community' means a community in which 70 percent of 
        households earn less than 85 percent of the State median 
        household income.
          ``(6) Nurse.--The term `nurse' means a nurse who meets all of 
        the following:
                  ``(A) The nurse graduated from--
                          ``(i) an accredited school of nursing (as 
                        those terms are defined in section 801 of the 
                        Public Health Service Act (42 U.S.C. 296));
                          ``(ii) a nursing center; or
                          ``(iii) an academic health center that 
                        provides nurse training.
                  ``(B) The nurse holds a valid and unrestricted 
                license to practice nursing in the State in which the 
                nurse practices in a clinical setting.
                  ``(C) The nurse holds one or more of the following:
                          ``(i) A graduate degree in nursing, or an 
                        equivalent degree.
                          ``(ii) A nursing degree from a collegiate 
                        school of nursing (as defined in section 801 of 
                        the Public Health Service Act (42 U.S.C. 296)).
                          ``(iii) A nursing degree from an associate 
                        degree school of nursing (as defined in section 
                        801 of the Public Health Service Act (42 U.S.C. 
                        296)).
                          ``(iv) A nursing degree from a diploma school 
                        of nursing (as defined in section 801 of the 
                        Public Health Service Act (42 U.S.C. 296)).
          ``(7) Speech-language pathologist.--The term `speech-language 
        pathologist' means a speech-language pathologist who--
                  ``(A) has received, at a minimum, a graduate degree 
                in speech-language pathology or communication sciences 
                and disorders from an institution of higher education 
                accredited by an agency or association recognized by 
                the Secretary pursuant to section 496(a) of this Act; 
                and
                  ``(B) provides speech-language pathology services 
                under section 1861(ll)(1) of the Social Security Act 
                (42 U.S.C. 1395x(ll)(1), or meets or exceeds the 
                qualifications for a qualified speech-language 
                pathologist under subsection (ll)(3) of such section 
                (42 U.S.C. 1395x(ll)(3)).
  ``(h) Program Funding.--There shall be available to the Secretary to 
carry out this section, from funds not otherwise appropriated, such 
sums as may be necessary to provide loan forgiveness in accordance with 
this section to each eligible individual.''.

SEC. 132. INCOME-CONTINGENT REPAYMENT FOR PUBLIC SECTOR EMPLOYEES.

  Section 455(e) (20 U.S.C. 1087e(e)) is amended by adding at the end 
the following:
          ``(7) Repayment plan for public sector employees.--
                  ``(A) In general.--The Secretary shall forgive the 
                balance due on any loan made under this part or section 
                428C(b)(5) for a borrower--
                          ``(i) who has made 120 payments on such loan 
                        pursuant to income-contingent repayment; and
                          ``(ii) who is employed, and was employed for 
                        the 10-year period in which the borrower made 
                        the 120 payments described in clause (i), in a 
                        public sector job.
                  ``(B) Public sector job.--In this paragraph, the term 
                `public sector job' means a full-time job in emergency 
                management, government, public safety, law enforcement, 
                public health, education (including early childhood 
                education), social work in a public child or family 
                service agency, or public interest legal services 
                (including prosecution or public defense).
          ``(8) Return to standard repayment.--A borrower who is 
        repaying a loan made under this part pursuant to income-
        contingent repayment may choose, at any time, to terminate 
        repayment pursuant to income-contingent repayment and repay 
        such loan under the standard repayment plan.''.

SEC. 133. INCOME-BASED REPAYMENT.

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

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

  ``(a) Definitions.--In this section:
          ``(1) Excepted plus loan.--The term `excepted PLUS loan' 
        means a loan under section 428B, or a Federal Direct PLUS Loan, 
        that is made, insured, or guaranteed on behalf of a dependent 
        student.
          ``(2) Partial financial hardship.--The term `partial 
        financial hardship', when used with respect to a borrower, 
        means that for such borrower--
                  ``(A) the annual amount due on the total amount of 
                loans made, insured, or guaranteed under part B or D 
                (other than an excepted PLUS loan) to a borrower as 
                calculated under the standard repayment plan under 
                section 428(b)(9)(A)(i) or 455(d)(1)(A); exceeds
                  ``(B) 15 percent of the result obtained by 
                calculating the amount by which--
                          ``(i) the borrower's, and the borrower's 
                        spouse's (if applicable), adjusted gross 
                        income; exceeds
                          ``(ii) 150 percent of the poverty line 
                        applicable to the borrower's family size as 
                        determined under section 673(2) of the 
                        Community Services Block Grant Act (42 U.S.C. 
                        9902(2)).
  ``(b) Income-Based Repayment Program Authorized.--Notwithstanding any 
other provision of this Act, the Secretary shall carry out a program 
under which--
          ``(1) a borrower of any loan made, insured, or guaranteed 
        under part B or D (other than an excepted PLUS loan) who has a 
        partial financial hardship may elect, during any period the 
        borrower has the partial financial hardship, to have the 
        borrower's aggregate monthly payment for all such loans not 
        exceed the result described in subsection (a)(2)(B) divided by 
        12;
          ``(2) the holder of such a loan shall apply the borrower's 
        monthly payment under this subsection first toward interest due 
        on the loan and then toward the principal of the loan;
          ``(3) any interest due and not paid under paragraph (2) shall 
        be capitalized;
          ``(4) any principal due and not paid under paragraph (2) 
        shall be deferred;
          ``(5) the amount of time the borrower makes monthly payments 
        under paragraph (1) may exceed 10 years;
          ``(6) if the borrower no longer has a partial financial 
        hardship or no longer wishes to continue the election under 
        this subsection, then--
                  ``(A) the maximum monthly payment required to be paid 
                for all loans made to the borrower under part B or D 
                (other than an excepted PLUS loan) shall not exceed the 
                monthly amount calculated under section 428(b)(9)(A)(i) 
                or 455(d)(1)(A) when the borrower first made the 
                election described in this subsection; and
                  ``(B) the amount of time the borrower is permitted to 
                repay such loans may exceed 10 years;
          ``(7) the Secretary shall repay or cancel any outstanding 
        balance of principal and interest due on all loans made under 
        part B or D (other than a loan under section 428B or a Federal 
        Direct PLUS Loan) to a borrower who--
                  ``(A) is in deferment due to an economic hardship 
                described in section 435(o) for a period of time 
                prescribed by the Secretary, not to exceed 20 years; or
                  ``(B)(i) makes the election to participate in income-
                based repayment under paragraph (1); and
                  ``(ii) for a period of time prescribed by the 
                Secretary, not to exceed 20 years (including any period 
                during which the borrower is in deferment due to an 
                economic hardship described in section 435(o)), meets 1 
                or more of the following requirements:
                          ``(I) has made reduced monthly payments under 
                        paragraph (1);
                          ``(II) has made monthly payments of not less 
                        than the monthly amount calculated under 
                        section 428(b)(9)(A)(i) or 455(d)(1)(A) when 
                        the borrower first made the election described 
                        in this subsection;
                          ``(III) has made payments under a standard 
                        repayment plan under section 428(b)(9)(A)(i) or 
                        455(d)(1)(A);
                          ``(IV) has made payments under an income-
                        contingent repayment plan under section 
                        455(d)(1)(D); and
          ``(8) a borrower who is repaying a loan made under this part 
        pursuant to income-based repayment may elect, at any time, to 
        terminate repayment pursuant to income-based repayment and 
        repay such loan under the standard repayment plan.''.
  (b) Conforming ICR Amendment.--Section 455(d)(1)(D) (20 U.S.C. 
1087e(d)(1)(D)) is amended by inserting ``made on behalf of a dependent 
student'' after ``PLUS loan''.

SEC. 134. DEFINITION OF ECONOMIC HARDSHIP.

  Section 435(o) (20 U.S.C. 1085(o)) is amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (A)(ii)--
                          (i) by striking ``100 percent of the poverty 
                        line for a family of 2'' and inserting ``150 
                        percent of the poverty line applicable to the 
                        borrower's family size''; and
                          (ii) by inserting ``or'' after the semicolon;
                  (B) by striking subparagraph (B); and
                  (C) by redesignating subparagraph (C) as subparagraph 
                (B); and
          (2) in paragraph (2), by striking ``(1)(C)'' and inserting 
        ``(1)(B)''.

SEC. 135. DEFERRALS.

  (a) FISL.--Section 427(a)(2)(C)(iii) (20 U.S.C. 1077(a)(2)(C)(iii)) 
is amended by striking ``not in excess of 3 years''.
  (b) Interest Subsidies.--Section 428(b)(1)(M)(iv) (20 U.S.C. 
1078(b)(1)(M)(iv)) is amended by striking ``not in excess of 3 years''.
  (c) Direct Loans.--Section 455(f)(2)(D) (20 U.S.C. 1087e(f)(2)(D)) is 
amended by striking ``not in excess of 3 years''.
  (d) Perkins.--Section 464(c)(2)(A)(iv) (20 U.S.C. 
1087dd(c)(2)(A)(iv)) is amended by striking ``not in excess of 3 
years''.

SEC. 136. MAXIMUM REPAYMENT PERIOD.

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

SEC. 137. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.

  Part G of title IV is amended by inserting after section 484B (20 
U.S.C. 1091b) the following new section:

``SEC. 484C. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.

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

SEC. 138. SENSE OF THE CONGRESS; REPORT.

  (a) Sense of Congress.--It is the sense of the Congress that--
          (1) in order to provide the borrowers of Federal student 
        loans with the option of converting their loans to income-
        contingent repayment by providing direct loans for the 
        discharge of such loans (in this section referred to as 
        ``direct IDEA loans''), the Secretary of Education and the 
        Secretary of the Treasury will work together with the 
        Government Accountability Office to develop a process by which 
        the borrower will make payments on such loan using the income 
        tax withholding system and will make appropriate adjustments to 
        his or her withholding or estimated tax payments for such 
        purposes;
          (2) the Secretaries shall determine--
                  (A) whether such a repayment option would be 
                beneficial to borrowers and taxpayers; and
                  (B) how such program would be implemented by the 
                Departments of Education and Treasury; and
          (3) this process would--
                  (A) streamline the repayment process and provide 
                greater flexibility for borrowers electing to use the 
                direct IDEA loan;
                  (B) significantly reduce the number of loan defaults 
                by borrowers; and
                  (C) significantly reduce the redundancy in reporting 
                information pertaining to income-contingent repayment 
                to the Department of Education, institutions, and 
                applicants.
  (b) Report.--The Secretaries of Education and the Treasury shall, 
within one year after the date of enactment of this Act--
          (1) provide the Congress with information on the progress in 
        devising the direct IDEA loan with income-contingent repayment 
        using the income tax withholding system;
          (2) inform the Congress of any necessary statutory changes 
        for the purpose of establishing a direct IDEA loan with income-
        contingent repayment using the income tax withholding system; 
        and
          (3) consider international programs demonstrating 
        implementation of income-contingent repayment collected through 
        revenue services, such as programs in England, Australia, and 
        New Zealand.

              PART D--SUSTAINING THE PERKINS LOAN PROGRAM

SEC. 141. FEDERAL PERKINS LOANS.

  Section 461(b) (20 U.S.C. 1087aa(b)) is amended by adding at the end 
the following new paragraphs:
          ``(3) In addition to any amounts appropriated pursuant to 
        paragraph (1) or (2) of this subsection, there shall be 
        available to the Secretary for contributions to student loan 
        funds established under part E, from funds not otherwise 
        appropriated, $100,000,000 for each of the fiscal years 2008 
        through 2012. The sum of the amount made available under this 
        subsection for any such fiscal year, plus the amount so 
        appropriated for such fiscal year, shall, for purposes of 
        allocations under section 462, be treated as the amount 
        appropriated pursuant to section 461(b) for such fiscal year.
          ``(4) The authority to make contributions to student loan 
        funds under this part shall expire at the end of fiscal year 
        2012.''.

                 TITLE II--REDUCING THE COST OF COLLEGE

SEC. 201. STATE COMMITMENT TO AFFORDABLE COLLEGE EDUCATION.

  Title I is amended by inserting after section 131 (20 U.S.C. 1015) 
the following new section:

``SEC. 132. STATE COMMITMENT TO AFFORDABLE COLLEGE EDUCATION.

  ``(a) Maintenance of Effort Required.--No State shall reduce the 
total amount provided by the State for public institutions of higher 
education in such State for any academic year beginning on or after 
July 1, 2008, to an amount which is less than the average amount 
provided by such State to such institutions of higher education during 
the 5 most recent preceeding academic years for which satisfactory data 
is available.
  ``(b) Waiver.--The Secretary may waive the requirements of this 
section, if the Secretary determines that such a waiver would be 
equitable due to exceptional or uncontrollable circumstances, such as a 
natural disaster or a precipitous and unforeseen decline in the 
financial resources of the State educational agency.
  ``(c) Withholding of All LEAP Funds for Violations.--Notwithstanding 
any other provision of law, the Secretary of Education shall withhold 
from any State that violates subsection (a) (except a State that 
receives a waiver under subsection (b)) any amount that would otherwise 
be available to the State under the Leveraging Educational Assistance 
Partnership Program under subpart 4 of part A of title IV until such 
State has corrected such violation.''.

SEC. 202. CONSUMER INFORMATION AND PUBLIC ACCOUNTABILITY IN HIGHER 
                    EDUCATION.

  Section 131 of the Higher Education Act of 1965 (20 U.S.C. 1015) is 
amended to read as follows:

``SEC. 131. CONSUMER INFORMATION AND PUBLIC ACCOUNTABILITY IN HIGHER 
                    EDUCATION.

  ``(a) College Opportunity On-Line (COOL) Website Re-Design Process.--
In carrying out this section, the Commissioner of Education 
Statistics--
          ``(1) shall identify the data elements related to college 
        costs that are of greatest importance to prospective students, 
        enrolled students, and their families, paying particular 
        attention to low-income, non-traditional student populations, 
        and first-generation college students;
          ``(2) shall convene a group of individuals with expertise in 
        the collection and reporting of data related to institutions of 
        higher education, the use of consumer data, and consumer 
        marketing in general to--
                  ``(A) determine the relevance of particular data 
                elements to prospective students, enrolled students, 
                and families;
                  ``(B) assess the cost-effectiveness of various ways 
                in which institutions of higher education might produce 
                relevant data;
                  ``(C) determine the general comparability of the data 
                across institutions of higher education; and
                  ``(D) make recommendations regarding the inclusion of 
                specific data items and the most effective and least 
                burdensome methods of collecting and reporting useful 
                data from institutions of higher education; and
          ``(3) shall ensure that the redesigned COOL website--
                  ``(A) uses, to the extent practicable, data elements 
                currently provided by institutions of higher education 
                to the Secretary;
                  ``(B) includes clear and uniform information 
                determined to be relevant to prospective students, 
                enrolled students, and families;
                  ``(C) provides comparable information, by ensuring 
                that data are based on accepted criteria and common 
                definitions;
                  ``(D) includes a sorting function that permits users 
                to customize their search for and comparison of 
                institutions of higher education based on the 
                information identified through the process as 
                prescribed in paragraph (1) as being of greatest 
                relevance to choosing an institution of higher 
                education.
  ``(b) Data Collection.--
          ``(1) Data system.--The Commissioner of Education Statistics 
        shall continue to redesign the relevant parts of the Integrated 
        Postsecondary Education Data System to include additional data 
        as required by this section and to continue to improve the 
        usefulness and timeliness of data collected by such System in 
        order to inform consumers about institutions of higher 
        education.
          ``(2) College consumer profile.--The Secretary shall continue 
        to publish on the COOL website, for each academic year and in 
        accordance with standard definitions developed by the 
        Commissioner of Education Statistics (including definitions 
        developed under section 131(a)(3)(A) as in effect on the day 
        before the date of enactment of the College Cost Reduction Act 
        of 2007), from at least all institutions of higher education 
        participating in programs under title IV the following 
        information:
                  ``(A) The tuition and fees charged for a first-time, 
                full-time undergraduate student.
                  ``(B) The room and board charges for a first-time, 
                full-time undergraduate student.
                  ``(C) The price of attendance for a first-time, full-
                time undergraduate student, consistent with the 
                provisions of section 472.
                  ``(D) The average amount of financial assistance 
                received by a first-year, full-time undergraduate 
                student, including--
                          ``(i) each type of assistance or benefits 
                        described in 428(a)(2)(C)(ii);
                          ``(ii) institutional and other assistance; 
                        and
                          ``(iii) Federal loans under parts B, D, and E 
                        of title IV.
                  ``(E) The number of first-time, full-time 
                undergraduate students receiving financial assistance 
                described in each clause of subparagraph (D).
                  ``(F) The institutional instructional expenditure per 
                full-time equivalent student.
                  ``(G) Student enrollment information, including 
                information on the number and percentage of full-time 
                and part-time students, and the number and percentage 
                of resident and non-resident students.
                  ``(H) Faculty-to-student ratios.
                  ``(I) Faculty information, including the total number 
                of faculty and the percentage of faculty who are full-
                time employees of the institution and the percentage 
                who are part-time.
                  ``(J) Completion and graduation rates of 
                undergraduate students, identifying whether the 
                completion or graduation rates are from a 2-year or 4-
                year program of instruction and, in the case of a 2-
                year program of instruction, the percentage of students 
                who transfer to 4-year institutions prior or subsequent 
                to completion or graduation.
                  ``(K) A link to the institution of higher education 
                with information of interest to students including 
                mission, accreditation, student services (including 
                services for students with disabilities), transfer of 
                credit policies, any articulation agreements entered 
                into by the institution, and, if appropriate, placement 
                rates and other measures of success in preparing 
                students for entry into or advancement in the 
                workforce.
                  ``(L) The college affordability information elements 
                specified in subsection (c).
                  ``(M) Any additional information that the Secretary 
                may require.
  ``(c) College Affordability Information Elements.--The college 
affordability information elements required by subsection (b)(2)(L) 
shall include, for each institution submitting data--
          ``(1) the sticker price of the institution for the 3 most 
        recent academic years;
          ``(2) the net tuition price of the institution for the 3 most 
        recent academic years;
          ``(3) the percentage change in both the sticker price and the 
        net tuition price over the 3-year time period that is being 
        reported;
          ``(4) the percentage change in the higher education price 
        index (as defined in section 401B(d)) over the same 3-year time 
        period; and
          ``(5) whether the institution has been placed on 
        affordability alert status as required by subsection (d)(2).
  ``(d) Outcomes and Actions.--
          ``(1) Response from institution.--Effective on June 30, 2008, 
        an institution that increases its sticker price at a percentage 
        rate for any 3-year interval ending on or after that date that 
        exceeds two times the rate of change in the higher education 
        price index (as defined in section 401B(d)) over the same time 
        period shall provide a report to the Secretary, in such a form, 
        at such time, and containing such information as the Secretary 
        may require. Such report shall be published by the Secretary on 
        the COOL website, and shall include--
                  ``(A) a description of the factors contributing to 
                the increase in the institution's costs and in the 
                tuition and fees charged to students; and
                  ``(B) if determinations of tuition and fee increases 
                are not within the exclusive control of the 
                institution, a description of the agency or 
                instrumentality of State government or other entity 
                that participates in such determinations and the 
                authority exercised by such agency, instrumentality, or 
                entity.
          ``(2) Consequences for 2-year continuation of failure.--If 
        the Secretary determines that an institution that is subject to 
        paragraph (1) has failed to reduce the subsequent increase in 
        sticker price to equal to or below two times the rate of change 
        in the higher education price index (as defined in section 
        401B(d)) for 2 consecutive academic years subsequent to the 3-
        year interval used under paragraph (1), the Secretary shall 
        place the institution on affordability alert status.
          ``(3) Exemptions.--Notwithstanding paragraph (2), an 
        institution shall not be placed on affordability alert status 
        if, for any 3-year interval for which sticker prices are 
        computed under paragraph (1)--
                  ``(A) with respect the the class of institutions 
                described in paragraph (5) to which the institution 
                belongs, the sticker price of the institution is in the 
                lowest quartile of institutions within such class, as 
                determined by the Secretary, during the last year of 
                such 3-year interval; or
                  ``(B) the institution has a percentage change in its 
                sticker price computed under paragraph (1) that exceeds 
                two times the rate of change in the higher education 
                price index (as defined in section 401B(d)) over the 
                same time period, but the dollar amount of the sticker 
                price increase is less than $500.
          ``(4) Information to state agencies.--Any institution that 
        reports under paragraph (1)(B) that an agency or 
        instrumentality of State government or other entity 
        participates in the determinations of tuition and fee increases 
        shall, prior to submitting any information to the Secretary 
        under this subsection, submit such information to, and request 
        the comments and input of, such agency, instrumentality, or 
        entity. With respect to any such institution, the Secretary 
        shall provide a copy of any communication by the Secretary with 
        that institution to such agency, instrumentality, or entity.
          ``(5) Classes of institutions.--For purposes of this 
        subsection, the classes of institutions shall be those sectors 
        used by the Integrated Postsecondary Education Data System, 
        based on whether the institution is public, nonprofit private, 
        or for-profit private, and whether the institution has a 4-
        year, 2-year, or less than 2-year program of instruction.
          ``(6) Data rejection.--Nothing in this subsection shall be 
        construed as allowing the Secretary to reject the data 
        submitted by an individual institution of higher education.
  ``(e) Information to the Public.--The Secretary shall work with 
public and private entities to promote broad public awareness, 
particularly among middle and high school students and their families, 
of the information made available under this section, including by 
distribution to students who participate in or receive benefits from 
means-tested federally funded education programs and other Federal 
programs determined by the Secretary.
  ``(f) Fines.--In addition to actions authorized in section 487(c), 
the Secretary may impose a fine in an amount not to exceed $25,000 on 
an institution of higher education for failing to provide the 
information required by this section in a timely and accurate manner, 
or for failing to otherwise cooperate with the National Center for 
Education Statistics regarding efforts to obtain data under subsection 
(c) and pursuant to the program participation agreement entered into 
under section 487.
  ``(g) Regulations.--The Secretary is authorized to issue such 
regulations as may be necessary to carry out the provisions of this 
section.
  ``(h) Definitions.--For the purposes of this section:
          ``(1) Net tuition price.--The term `net tuition price' means 
        the sticker price, minus the average grants provided to such 
        students, for any academic year.
          ``(2) Sticker price.--The term `sticker price' means the 
        average tuition and fees charged to a first-time, full-time, 
        full-year undergraduate student by an institution of higher 
        education for any academic year.''.

SEC. 203. INCENTIVES AND REWARDS FOR LOW TUITION.

  Subpart 1 of part A of title IV is amended by inserting after section 
401A (20 U.S.C. 1070a-1) the following new section:

``SEC. 401B. INCENTIVES AND REWARDS FOR LOW TUITION.

  ``(a) Rewards for Low Tuition.--For an institution of higher 
education that, for academic year 2008-2009 or any succeeding academic 
year, has an annual net tuition price increase (expressed as a 
percentage) for the most recent academic year for which satisfactory 
data is available that is equal to or less than the percentage change 
in the higher education price index for such academic year, the 
Secretary shall provide such institution an amount sufficient to 
provide a 25 percent increase under subpart 1 of part A of title IV to 
each Pell Grant recipient attending such institution for the next award 
year beginning after the date of such determination. Each such 
institution shall distribute any amounts received under this subsection 
among such Pell Grant recipients by increasing the amount of their Pell 
Grant awards by 25 percent.
  ``(b) Rewards for Guaranteed Tuition.--
          ``(1) Bonus.--For each institution of higher education that 
        the Secretary of Education determines complies with the 
        requirements of paragraph (2) or (3) of this subsection, the 
        Secretary shall provide to such institution a bonus amount 
        equal to 25 percent of the aggregate amount of aid received by 
        students at the institution under section 401(a). Such 
        institution shall award the bonus amount to the Pell Grant 
        recipients who were in attendance at the institution during the 
        award year that such institution satisfied the eligibility 
        criteria for maintaining low tuition and fees. Each such 
        student shall receive an amount that equals 25 percent of their 
        total Pell Grant award for such award year, except that no 
        student shall recieve an amount under this section that would 
        cause the amount of total financial aid received by such 
        student to exceed the cost of attendance of the institution. If 
        there are additional funds remaining after all eligible 
        students have been paid from the bonus amount, the institution 
        shall award all excess funds first to remaining Pell Grant 
        recipients who were not in attendance at the institution during 
        such award year, and then to other eligible students under this 
        title in attendance at such institution in the form of need-
        based aid.
          ``(2) 4-year institutions.--An institution of higher 
        education that provides a program of instruction for which it 
        awards a bachelor's degree complies with the requirements of 
        this paragraph if such institution guarantees that for any 
        academic year beginning on or after July 1, 2008, and for each 
        of the 4 succeeding continuous academic years, the net tuition 
        price charged to an undergraduate student will not exceed--
                  ``(A) the amount that the student was charged for an 
                academic year at the time he or she first enrolled in 
                the institution of higher education, plus
                  ``(B) the product of the percentage increase in the 
                higher education price index for the prior academic 
                year, or the most recent prior academic year for which 
                data is available, multiplied by the amount determined 
                under subparagraph (A).
          ``(3) Less-than 4-year institutions.--An institution of 
        higher education that does not provide a program of instruction 
        for which it awards a bachelor's degree complies with the 
        requirements of this paragraph if such institution guarantees 
        that for any academic year (or the equivalent) beginning on or 
        after July 1, 2008, and for each of the 1.5 succeeding 
        continuous academic years, the net tuition price charged to an 
        undergraduate student will not exceed--
                  ``(A) the amount that the student was charged for an 
                academic year at the time he or she first enrolled in 
                the institution of higher education, plus
                  ``(B) the product of the percentage increase in the 
                higher education price index for the prior academic 
                year, or the most recent prior academic year for which 
                data is available, multiplied by the amount determined 
                under subparagraph (A).
  ``(c) Maintaining Affordable Tuition.--For any institution of higher 
education whose increase in the annual net tuition price (expressed as 
a percentage), for the most recent academic year for which satisfactory 
data is available, is greater than the percentage increase in the 
higher education price index for such academic year, the Secretary 
shall require such institution to submit to the Secretary the following 
information, within 6 months of such determination:
          ``(1) a detailed report on the exact causes for the net 
        tuition price increase that outlines revenues and expenditures; 
        and
          ``(2) cost containment strategies to lower net tuition 
        prices.
  ``(d) Priority.--In awarding incentives and rewards under this 
section, the Secretary shall give priority to institutions of higher 
education with the lowest annual net tuition price increase (expressed 
as a percentage) for the most recent academic year for which 
satisfactory data is available, when compared with other institutions 
of higher education with annual net tuition price increases that are 
equal to or less than the percentage change in the higher education 
price index for such academic year.
  ``(e) Definitions.--
          ``(1) Net tuition price.--The term `net tuition price' has 
        the same meaning as provided in section 131(k).
          ``(2) Higher education price index.--The term `higher 
        education price index' means a statistical measure of change 
        over time in the prices of a fixed market basket of goods and 
        services purchased by colleges and universities through current 
        fund educational and general expenditures (excluding 
        expenditures for research), as developed by the Bureau of Labor 
        Statistics.
  ``(f) Funding.--There shall be available to the Secretary to carry 
out this section, from funds not otherwise appropriated, $15,000,000 
for each of the fiscal years 2008 through 2012.
  ``(g) Sunset.--The authority to carry out this section shall expire 
at the end of fiscal year 2012.''.

SEC. 204. COOPERATIVE EDUCATION REWARDS FOR INSTITUTIONS THAT RESTRAIN 
                    TUITION INCREASES.

  The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended 
by adding at the end the following title:

   ``TITLE VIII--COOPERATIVE EDUCATION REWARDS FOR INSTITUTIONS THAT 
                       RESTRAIN TUITION INCREASES

``SEC. 801. DEFINITION OF COOPERATIVE EDUCATION.

  ``For the purpose of this title the term `cooperative education' 
means the provision of alternating or parallel periods of academic 
study and public or private employment in order to give students work 
experiences related to their academic or occupational objectives and an 
opportunity to earn the funds necessary for continuing and completing 
their education.

``SEC. 802. AUTHORIZATION OF APPROPRIATIONS; RESERVATIONS.

  ``(a) Appropriations.--There shall be available to the Secretary to 
carry out this title from funds not otherwise appropriated $15,000,000 
for each of the fiscal years 2008 through 2012.
  ``(b) Reservations.--Of the amount appropriated for each such fiscal 
year--
          ``(1) not less than 50 percent shall be available for 
        carrying out grants to institutions of higher education and 
        combinations of such institutions described in section 
        803(a)(1)(A) for cooperative education under section 803;
          ``(2) not less than 25 percent shall be available for 
        carrying out grants to institutions of higher education 
        described in section 803(a)(1)(B) for cooperative education 
        under section 803;
          ``(3) not more than 11 percent shall be available for 
        demonstration projects under paragraph (1) of section 804(a);
          ``(4) not more than 11 percent shall be available for 
        training and resource centers under paragraph (2) of section 
        804(a); and
          ``(5) not more than 3 percent shall be available for research 
        under paragraph (3) of section 804(a).
  ``(c) Availability of Appropriations.--Appropriations under this 
title shall not be available for the payment of compensation of 
students for employment by employers under arrangements pursuant to 
this title.
  ``(d) Sunset.--The authority to carry out this title shall expire at 
the end of fiscal year 2012.

``SEC. 803. GRANTS FOR COOPERATIVE EDUCATION.

  ``(a) Grants Authorized.--
          ``(1) In general.--The Secretary is authorized--
                  ``(A) from the amount available under section 
                802(b)(1) in each fiscal year and in accordance with 
                the provisions of this title, to make grants to 
                institutions of higher education or combinations of 
                such institutions that have not previously received a 
                grant under this paragraph to pay the Federal share of 
                the cost of planning, establishing, expanding, or 
                carrying out programs of cooperative education by such 
                institutions or combinations of institutions; and
                  ``(B) from the amount available under section 
                802(b)(2) in each fiscal year and in accordance with 
                the provisions of this title, to make grants to 
                institutions of higher education that are operating an 
                existing cooperative education program (as determined 
                by the Secretary) to pay the cost of planning, 
                establishing, expanding, or carrying out programs of 
                cooperative education by such institutions.
          ``(2) Program requirement.--Cooperative education programs 
        assisted under this section shall provide alternating or 
        parallel periods of academic study and of public or private 
        employment, giving students work experience related to their 
        academic or occupational objectives and the opportunity to earn 
        the funds necessary for continuing and completing their 
        education.
          ``(3) Amount of grants.--
                  ``(A) The amount of each grant awarded pursuant to 
                paragraph (1)(A) to any institution of higher education 
                or combination of such institutions in any fiscal year 
                shall not exceed $500,000.
                  ``(B)(i) Except as provided in clauses (ii) and 
                (iii), the Secretary shall award grants in each fiscal 
                year to each institution of higher education described 
                in paragraph (1)(B) that has an application approved 
                under subsection (b) in an amount which bears the same 
                ratio to the amount reserved pursuant to section 
                802(b)(2) for such fiscal year as the number of 
                unduplicated students placed in cooperative education 
                jobs during the preceding fiscal year (other than 
                cooperative education jobs under section 804 and as 
                determined by the Secretary) by such institution of 
                higher education bears to the total number of all such 
                students placed in such jobs during the preceding 
                fiscal year by all such institutions.
                  ``(ii) No institution of higher education shall 
                receive a grant pursuant to paragraph (1)(B) in any 
                fiscal year in an amount which exceeds 25 percent of 
                such institution's cooperative education program's 
                personnel and operating budget for the preceding fiscal 
                year.
                  ``(iii) The minimum annual grant amount which an 
                institution of higher education is eligible to receive 
                under paragraph (1)(B) is $1,000 and the maximum annual 
                grant amount is $75,000.
          ``(4) Limitation.--The Secretary shall not award grants 
        pursuant to paragraphs (1)(A) and (1)(B) to the same 
        institution of higher education or combination of such 
        institution in any one fiscal year.
          ``(5) Uses.--Grants under paragraph (1)(B) shall be used 
        exclusively--
                  ``(A) to expand the quality and participation of a 
                cooperative education program;
                  ``(B) for outreach in new curricular areas; and
                  ``(C) for outreach to potential participants 
                including underrepresented and nontraditional 
                populations.
  ``(b) Applications.--Each institution of higher education or 
combination of such institutions desiring to receive a grant under this 
section shall submit an application to the Secretary at such time and 
in such manner as the Secretary shall prescribe. Each such application 
shall--
          ``(1) set forth the program or activities for which a grant 
        is authorized under this section;
          ``(2) specify each portion of such program or activities 
        which will be performed by a nonprofit organization or 
        institution other than the applicant, and the compensation to 
        be paid for such performance;
          ``(3) provide that the applicant will expend during such 
        fiscal year for the purpose of such program or activities not 
        less than the amount expended for such purpose during the 
        previous fiscal year;
          ``(4) describe the plans which the applicant will carry out 
        to assure, and contain a formal statement of the institution's 
        commitment which assures, that the applicant will continue the 
        cooperative education program beyond the 5-year period of 
        Federal assistance described in subsection (c)(1) at a level 
        which is not less than the total amount expended for such 
        program during the first year such program was assisted under 
        this section;
          ``(5) provide that, in the case of an institution of higher 
        education that provides a 2-year program which is acceptable 
        for full credit toward a bachelor's degree, the cooperative 
        education program will be available to students who are 
        certificate or associate degree candidates and who carry at 
        least one-half the normal full-time academic workload;
          ``(6) provide that the applicant will--
                  ``(A) for each fiscal year for which the applicant 
                receives a grant, make such reports with respect to the 
                impact of the cooperative education program in the 
                previous fiscal year as may be essential to ensure that 
                the applicant is complying with the provisions of this 
                section, including--
                          ``(i) the number of unduplicated student 
                        applicants in the cooperative education 
                        program;
                          ``(ii) the number of unduplicated students 
                        placed in cooperative education jobs;
                          ``(iii) the number of employers who have 
                        hired cooperative education students;
                          ``(iv) the average income for students 
                        derived from working in cooperative education 
                        jobs; and
                          ``(v) the increase or decrease in the number 
                        of unduplicated students placed in cooperative 
                        education jobs in each fiscal year compared to 
                        the previous fiscal year; and
                  ``(B) keep such records as are essential to ensure 
                that the applicant is complying with the provisions of 
                this title, including the notation of cooperative 
                education employment on the student's transcript;
          ``(7) describe the extent to which programs in the academic 
        discipline for which the application is made have had a 
        favorable reception by public and private sector employers;
          ``(8) describe the extent to which the institution is 
        committed to extending cooperative education on an institution-
        wide basis for all students who can benefit;
          ``(9) describe the plans that the applicant will carry out to 
        evaluate the applicant's cooperative education program at the 
        end of the grant period;
          ``(10) provide 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 applicant 
        under this title;
          ``(11) demonstrate a commitment to serving all underserved 
        populations; and
          ``(12) include such other information as is essential to 
        carry out the provisions of this title.
  ``(c) Duration of Grants; Federal Share.--
          ``(1) Duration of grants.--No individual institution of 
        higher education may receive, individually or as a participant 
        in a combination of such institutions--
                  ``(A) a grant pursuant to subsection (a)(1)(A) for 
                more than 5 fiscal years; or
                  ``(B) a grant pursuant to subsection (a)(1)(B) for 
                more than 5 fiscal years.
          ``(2) Federal share.--The Federal share of a grant under 
        section 803(a)(1)(A) may not exceed--
                  ``(A) 85 percent of the cost of carrying out the 
                program or activities described in the application in 
                the first year the applicant receives a grant under 
                this section;
                  ``(B) 70 percent of such cost in the second such 
                year;
                  ``(C) 55 percent of such cost in the third such year;
                  ``(D) 40 percent of such cost in the fourth such 
                year; and
                  ``(E) 25 percent of such cost in the fifth such year.
          ``(3) Special rule.--Any provision of law to the contrary 
        notwithstanding, the Secretary shall not waive the provisions 
        of this subsection.
  ``(d) Maintenance of Effort.--If the Secretary determines that a 
recipient of funds under this section has failed to maintain the fiscal 
effort described in subsection (b)(3), then the Secretary may elect not 
to make grant payments under this section to such recipient.

``SEC. 804. DEMONSTRATION AND INNOVATION PROJECTS; TRAINING AND 
                    RESOURCE CENTERS; AND RESEARCH.

  ``(a) Authorization.--The Secretary is authorized, in accordance with 
the provisions of this section, to make grants and enter into 
contracts--
          ``(1) from the amounts available in each fiscal year under 
        section 802(b)(3), for the conduct of demonstration projects 
        designed to demonstrate or determine the feasibility or value 
        of innovative methods of cooperative education ;
          ``(2) from the amounts available in each fiscal year under 
        section 802(b)(4), for the conduct of training and resource 
        centers designed to--
                  ``(A) train personnel in the field of cooperative 
                education;
                  ``(B) improve materials used in cooperative education 
                programs if such improvement is conducted in 
                conjunction with other activities described in this 
                paragraph;
                  ``(C) furnish technical assistance to institutions of 
                higher education to increase the potential of the 
                institution to continue to conduct a cooperative 
                education program without Federal assistance;
                  ``(D) encourage model cooperative education programs 
                which furnish education and training in occupations in 
                which there is a national need;
                  ``(E) support partnerships under which an institution 
                carrying out a comprehensive cooperative education 
                program joins with one or more institutions of higher 
                education in order to--
                          ``(i) assist the institutions other than the 
                        comprehensive cooperative education institution 
                        to develop and expand an existing program of 
                        cooperative education; or
                          ``(ii) establish and improve or expand 
                        comprehensive cooperative education programs; 
                        and
                  ``(F) encourage model cooperative education programs 
                in the fields of science and mathematics for women and 
                minorities who are underrepresented in such fields; and
          ``(3) from the amounts available in each fiscal year under 
        section 802(b)(5), for the conduct of research relating to 
        cooperative education.
  ``(b) Administrative Provision.--
          ``(1) In general.--To carry out this section, the Secretary 
        may--
                  ``(A) make grants to or contracts with institutions 
                of higher education, or combinations of such 
                institutions; and
                  ``(B) make grants to or contracts with other public 
                or private nonprofit agencies or organizations, 
                whenever such grants or contracts will make an 
                especially significant contribution to attaining the 
                objectives of this section.
          ``(2) Limitation.--
                  ``(A) The Secretary may not use more than 3 percent 
                of the amount appropriated to carry out this section in 
                each fiscal year to make grants or enter into contracts 
                described in paragraph (1)(A).
                  ``(B) The Secretary may use not more than 3 percent 
                of the amount appropriated to carry out this section in 
                each fiscal year to make grants or enter into contracts 
                described in paragraph (1)(B).
  ``(c) Supplement Not Supplant.--A recipient of a grant or contract 
under this section may use the funds provided only to supplement and, 
to the extent possible, increase the level of funds that would, in the 
absence of such funds, be made available from non-Federal sources to 
carry out the activities supported by such grant or contract, and in no 
case to supplant such funds from non-Federal sources.''.

   TITLE III--ENSURING A HIGHLY QUALIFIED TEACHER IN EVERY CLASSROOM

                          PART A--TEACH GRANTS

SEC. 301. TEACH GRANTS.

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

                       ``Subpart 9--TEACH Grants

``SEC. 420L. PROGRAM ESTABLISHED.

  ``(a) Program Authority.--
          ``(1) Payments required.--The Secretary shall pay to each 
        eligible institution such sums as may be necessary to pay to 
        each eligible student (defined in accordance with section 484) 
        who files an application and agreement in accordance with 
        section 420M, and who qualifies--
                  ``(A) under paragraph (2) of section 420M(a), a TEACH 
                Grant in the amount of $4,000 for each academic year 
                during which that student is in attendance at the 
                institution; and
                  ``(B) under paragraphs (2) and (3) of section 
                420M(a), a Bonus TEACH Grant in the amount of $500 (in 
                addition to the amount of the TEACH Grant under 
                subparagraph (A)) for each academic year during which 
                that student so qualifies.
          ``(2) Reference.--Grants made under--
                  ``(A) paragraph (1)(A) shall be known as `Teacher 
                Education Assistance for College and Higher Education 
                Grants' or `TEACH Grants'; and
                  ``(B) paragraph (1)(B) shall be known as Bonus TEACH 
                Grants.
  ``(b) Payment Methodology.--
          ``(1) Prepayment.--Not less than 85 percent of any funds 
        provided to an institution under subsection (a) shall be 
        advanced to eligible institutions prior to the start of each 
        payment period and shall be based upon an amount requested by 
        the institution as needed to pay eligible students until such 
        time as the Secretary determines and publishes in the Federal 
        Register with an opportunity for comment, an alternative 
        payment system that provides payments to institutions in an 
        accurate and timely manner, except that this sentence shall not 
        be construed to limit the authority of the Secretary to place 
        an institution on a reimbursement system of payment.
          ``(2) Direct payment.--Nothing in this section shall be 
        interpreted to prohibit the Secretary from paying directly to 
        students, in advance of the beginning 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) Distribution of grants to students.--Payments under 
        this subpart shall be made, in accordance with regulations 
        promulgated by the Secretary for such purpose, in such manner 
        as will best accomplish the purposes of this subpart. Any 
        disbursement allowed to be made by crediting the student's 
        account shall be limited to tuition and fees and, in the case 
        of institutionally-owned housing, room and board. The student 
        may elect to have the institution provide other such goods and 
        services by crediting the student's account.
  ``(c) Reductions in Amount.--
          ``(1) Part-time students.--In any case where a student 
        attends an institution of higher 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 a grant under this subpart for 
        which that student is eligible shall be reduced in proportion 
        to the degree to which that student is not attending on a full-
        time basis, in accordance with a schedule of reductions 
        established by the Secretary for the purposes of this subpart, 
        computed in accordance with this subpart. Such schedule of 
        reductions shall be established by regulation and published in 
        the Federal Register in accordance with section 482 of this 
        Act.
          ``(2) No exceeding cost.--The amount of a grant awarded under 
        this subpart, in combination with Federal assistance and other 
        student assistance, shall not exceed the cost of attendance (as 
        defined in section 472) at the institution at which that 
        student is in attendance. If, with respect to any student, it 
        is determined that the amount of a TEACH Grant or a Bonus TEACH 
        Grant exceeds the cost of attendance for that year, the amount 
        of the TEACH Grant or Bonus TEACH Grant, respectively, shall be 
        reduced until such grant does not exceed the cost of attendance 
        at such institution.
  ``(d) Period of Eligibility for Grants.--
          ``(1) Undergraduate students.--The period during which an 
        undergraduate student may receive grants under this subpart 
        shall be the period required 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--
                  ``(A) any period during which the student is enrolled 
                in a noncredit or remedial course of study as defined 
                in paragraph (3) shall not be counted for the purpose 
                of this paragraph; and
                  ``(B) the total amount that a student may receive 
                under this subpart for undergraduate study shall not 
                exceed $16,000 with respect to a student who receives 
                only TEACH Grants, and $18,000 with respect to a 
                student who receives TEACH Grants and Bonus TEACH 
                Grants.
          ``(2) Graduate students.--The period during which a graduate 
        student may receive grants under this subpart shall be the 
        period required for the completion of a master's degree course 
        of study being pursued by that student at the institution at 
        which the student is in attendance, except that the total 
        amount that a student may receive under this subpart for 
        graduate study shall not exceed $8,000 with respect to a 
        student who receives only TEACH Grants, and $10,000 with 
        respect to a student who receives TEACH Grants and Bonus TEACH 
        Grants.
          ``(3) Remedial course; study abroad.--Nothing in this section 
        shall exclude from eligibility courses of study which are 
        noncredit or remedial in nature (including courses in English 
        language acquisition) 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 certificate 
        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.

``SEC. 420M. ELIGIBILITY; APPLICATIONS.

  ``(a) Applications; Demonstration of Eligibility.--
          ``(1) Filing required.--The Secretary shall from time to time 
        set dates by which students shall file applications for grants 
        under this subpart. Each student desiring a grant under this 
        subpart for any year shall file an application containing such 
        information and assurances as the Secretary may deem necessary 
        to enable the Secretary to carry out the functions and 
        responsibilities of this subpart.
          ``(2) Demonstration of teach grant eligibility.--Each 
        application submitted under paragraph (1) for a TEACH Grant 
        shall contain such information as is necessary to demonstrate 
        that--
                  ``(A) if the applicant is an enrolled student--
                          ``(i) the student is an eligible student for 
                        purposes of section 484;
                          ``(ii) the student--
                                  ``(I) has a grade point average that 
                                is determined, under standards 
                                prescribed by the Secretary, to be 
                                comparable to a 3.25 average on a zero 
                                to 4.0 scale, except that, if the 
                                student is in the first year of a 
                                program of undergraduate education, 
                                such grade point average shall be 
                                determined on the basis of the 
                                student's cumulative high school grade 
                                point average; or
                                  ``(II) displayed high academic 
                                aptitude by receiving a score above the 
                                75th percentile on at least one of the 
                                batteries in an undergraduate or 
                                graduate school admissions test; and
                          ``(iii) the student is completing coursework 
                        and other requirements necessary to begin a 
                        career in teaching, or plans to complete such 
                        coursework and requirements prior to 
                        graduating; or
                  ``(B) if the applicant is a current or prospective 
                teacher applying for a grant to obtain a graduate 
                degree--
                          ``(i) the applicant is a teacher or a retiree 
                        from another occupation with expertise in a 
                        field in which there is a shortage of teachers, 
                        such as math, science, special education, 
                        English language acquisition, or another high-
                        need subject; or
                          ``(ii) the applicant is or was a teacher who 
                        is using high-quality alternative certification 
                        routes, such as Teach for America, to get 
                        certified.
          ``(3) Demonstration of bonus teach grant eligibility.--Each 
        application submitted under paragraph (1) for a Bonus TEACH 
        Grant shall contain such information as is necessary to 
        demonstrate that the applicant is--
                  ``(A) eligible for, and has applied for, a TEACH 
                Grant; and
                  ``(B) a student enrolled in a qualified teacher 
                preparation program, as defined in section 420N.
  ``(b) Agreements to Serve.--Each application under subsection (a) 
shall contain or be accompanied by an agreement by the applicant that--
          ``(1) the applicant will--
                  ``(A) serve as a full-time teacher for a total of not 
                less than 4 academic years within 8 years after 
                completing the course of study for which the applicant 
                received a TEACH Grant under this subpart;
                  ``(B) teach in a school described in section 
                465(a)(2)(A);
                  ``(C) with respect to an applicant for--
                          ``(i) TEACH Grants, teach in any of the 
                        following fields: mathematics, science, a 
                        foreign language, bilingual education, or 
                        special education, or as a reading specialist, 
                        or another field documented as high-need by the 
                        Federal Government, State government, or local 
                        education agency and approved by the Secretary; 
                        or
                          ``(ii) TEACH Grants and Bonus TEACH Grants, 
                        teach mathematics, science, or a science-
                        related field;
                  ``(D) submit evidence of such employment in the form 
                of a certification by the chief administrative officer 
                of the school upon completion of each year of such 
                service; and
                  ``(E) comply with the requirements for being a highly 
                qualified teacher as defined in section 9101 of the 
                Elementary and Secondary Education Act of 1965; and
          ``(2) in the event that the applicant is determined to have 
        failed or refused to carry out such service obligation, the sum 
        of the amounts of any TEACH Grants and Bonus TEACH Grants 
        received by such applicant will be treated as a loan and 
        collected from the applicant in accordance with subsection (c) 
        and the regulations thereunder.
  ``(c) Repayment for Failure to Complete Service.--In the event that 
any recipient of a grant under this subpart fails or refuses to comply 
with the service obligation in the agreement under subsection (b), the 
sum of the amounts of any TEACH Grants and Bonus TEACH Grants received 
by such recipient shall be treated as a Direct Loan under part D of 
title IV, and shall be subject to repayment, together with interest 
thereon accruing after the period of service, in accordance with terms 
and conditions specified by the Secretary in regulations under this 
subpart.

``SEC. 420N. DEFINITIONS.

  ``For the purposes of this subpart:
          ``(1) Eligible institution.--The term `eligible institution' 
        means an institution of higher education as defined in section 
        102.
          ``(2) Qualified teacher preparation program.--The term 
        `qualified teacher preparation program' means a program for 
        students and teachers described in subparagraph (A) or (B) of 
        section 420M(a)(2) (referred to jointly in this paragraph as 
        `teacher candidates') that--
                  ``(A) recruits and prepares teacher candidates who 
                major in science, technology fields, special education, 
                foreign language, engineering, or mathematics 
                disciplines to become certified as elementary and 
                secondary teachers in those disciplines, special 
                education teachers, or teachers of English Language 
                Learners, with the goals of improving teacher knowledge 
                and effectiveness and increasing elementary and 
                secondary student academic achievement;
                  ``(B) is implemented by an institution of higher 
                education in partnership with high-need local 
                educational agencies;
                  ``(C) offers a baccalaureate degree with a concurrent 
                teacher certification to teacher candidates;
                  ``(D) is implemented in coordination with the faculty 
                of the relevant departments of the institution of 
                higher education;
                  ``(E) utilizes experienced teachers who have a 
                demonstrated record of success in teaching underserved 
                students to instruct teacher candidates in the 
                disciplines described in subparagraph (A);
                  ``(F) provides teacher candidates with--
                          ``(i) support services, including mentoring 
                        by experienced teachers who have a demonstrated 
                        record of success in teaching underserved 
                        students;
                          ``(ii) exposure to, and field experience in, 
                        the classroom within the first year of entering 
                        the qualified teacher preparation program; and
                          ``(iii) other related support practices while 
                        the teacher candidates are participating in the 
                        program, and after such candidates graduate 
                        from the institution of higher education and 
                        are employed as teachers;
                  ``(G) participates in partnerships which include the 
                institution of higher education and local educational 
                agencies and charter districts to provide opportunities 
                for teacher candidate field work;
                  ``(H) focuses on increasing the number of teachers in 
                the disciplines described in subparagraph (A); and
                  ``(I) encourages individuals from underrepresented 
                populations to enter into the teaching profession.

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

  ``There shall be available to the Secretary to carry out this 
subpart, from funds not otherwise appropriated, such sums as may be 
necessary to provide TEACH Grants and Bonus TEACH Grants in accordance 
with this subpart to each eligible applicant.''.

                     PART B--CENTERS OF EXCELLENCE

SEC. 311. CENTERS OF EXCELLENCE.

  Title II (20 U.S.C. 1021 et seq.) is amended by adding at the end the 
following:

                    ``PART C--CENTERS OF EXCELLENCE

``SEC. 231. DEFINITIONS.

  ``As used in this part:
          ``(1) Eligible institution.--The term `eligible institution' 
        means--
                  ``(A) an institution of higher education that has a 
                teacher preparation program that meets the requirements 
                of section 203(b)(2)and that is--
                          ``(i) a part B institution (as defined in 
                        section 322);
                          ``(ii) a Hispanic-serving institution (as 
                        defined in section 502);
                          ``(iii) a Tribal College or University (as 
                        defined in section 316);
                          ``(iv) an Alaska Native-serving institution 
                        (as defined in section 317(b)); or
                          ``(v) a Native Hawaiian-serving institution 
                        (as defined in section 317(b));
                  ``(B) a consortium of institutions described in 
                subparagraph (A); or
                  ``(C) an institution described in subparagraph (A), 
                or a consortium described in subparagraph (B), in 
                partnership with any other institution of higher 
                education, but only if the center of excellence 
                established under section 232 is located at an 
                institution described in subparagraph (A).
          ``(2) Highly qualified.--The term `highly qualified' when 
        used with respect to an individual means that the individual is 
        highly qualified as determined under section 9101 of the 
        Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801) 
        or section 602 of the Individuals with Disabilities Education 
        Act (20 U.S.C. 1401).
          ``(3) Scientifically based reading research.--The term 
        `scientifically based reading research' has the meaning given 
        such term in section 1208 of the Elementary and Secondary 
        Education Act of 1965 (20 U.S.C. 6368).
          ``(4) Scientifically based research.--The term 
        `scientifically based research' has the meaning given such term 
        in section 9101 of the Elementary and Secondary Education Act 
        of 1965 (20 U.S.C. 7801).

``SEC. 232. CENTERS OF EXCELLENCE.

  ``(a) Program Authorized.--From the amounts appropriated to carry out 
this part, the Secretary is authorized to award competitive grants to 
eligible institutions to establish centers of excellence.
  ``(b) Use of Funds.--Grants provided by the Secretary under this part 
shall be used to ensure that current and future teachers are highly 
qualified, by carrying out one or more of the following activities:
          ``(1) Implementing reforms within teacher preparation 
        programs to ensure that such programs are preparing teachers 
        who are highly qualified, are able to understand scientifically 
        based research, and are able to use advanced technology 
        effectively in the classroom, including use for instructional 
        techniques to improve student academic achievement, by--
                  ``(A) retraining faculty; and
                  ``(B) designing (or redesigning) teacher preparation 
                programs that--
                          ``(i) prepare teachers to close student 
                        achievement gaps, are based on rigorous 
                        academic content, scientifically based research 
                        (including scientifically based reading 
                        research), and challenging State student 
                        academic content standards; and
                          ``(ii) promote strong teaching skills.
          ``(2) Providing sustained and high-quality preservice 
        clinical experience, including the mentoring of prospective 
        teachers by exemplary teachers, substantially increasing 
        interaction between faculty at institutions of higher education 
        and new and experienced teachers, principals, and other 
        administrators at elementary schools or secondary schools, and 
        providing support, including preparation time, for such 
        interaction.
          ``(3) Developing and implementing initiatives to promote 
        retention of highly qualified teachers and principals, 
        including minority teachers and principals, including programs 
        that provide--
                  ``(A) teacher or principal mentoring from exemplary 
                teachers or principals; or
                  ``(B) induction and support for teachers and 
                principals during their first 3 years of employment as 
                teachers or principals, respectively.
          ``(4) Awarding scholarships based on financial need to help 
        students pay the costs of tuition, room, board, and other 
        expenses of completing a teacher preparation program.
          ``(5) Disseminating information on effective practices for 
        teacher preparation and successful teacher certification and 
        licensure assessment preparation strategies.
          ``(6) Activities authorized under sections 202, 203, and 204.
  ``(c) Application.--Any eligible institution desiring a grant under 
this section shall submit an application to the Secretary at such a 
time, in such a manner, and accompanied by such information as the 
Secretary may require.
  ``(d) Minimum Grant Amount.--The minimum amount of each grant under 
this part shall be $500,000.
  ``(e) Limitation on Administrative Expenses.--An eligible institution 
that receives a grant under this part may not use more than 2 percent 
of the grant funds for purposes of administering the grant.
  ``(f) Regulations.--The Secretary shall prescribe such regulations as 
may be necessary to carry out this part.

``SEC. 233. APPROPRIATIONS.

  ``There shall be available to the Secretary, from funds not otherwise 
appropriated, $50,000,000 for the period beginning with fiscal year 
2008 and ending with fiscal year 2012, to carry out this part beginning 
with academic year 2008-2009, which shall remain available until 
expended. The authority to carry out this part shall expire at the end 
of fiscal year 2012.''.

         TITLE IV--LEVERAGING FUNDS TO INCREASE COLLEGE ACCESS

PART A--STRENGTHENING HISTORICALLY BLACK COLLEGES AND UNIVERSITIES AND 
                     MINORITY-SERVING INSTITUTIONS

SEC. 401. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                    AND MINORITY-SERVING INSTITUTION.

  Title IV is amended by adding at the end the following new part:

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

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

  ``(a) Eligible Institution.--An institution of higher education is 
eligible to receive funds from the amounts made available under this 
section if such institution is--
          ``(1) a part B institution (as defined in section 322 (20 
        U.S.C. 1061));
          ``(2) a Hispanic-serving institution (as defined in section 
        502 (20 U.S.C. 1101a));
          ``(3) a Tribal College or University (as defined in section 
        316 (20 U.S.C. 1059c));
          ``(4) an Alaska Native-serving institution or a Native 
        Hawaiian-serving institution (as defined in section 317(b) (20 
        U.S.C. 1059d(b)));
          ``(5) a Predominantly Black Institution (as defined in 
        subsection (c)); or
          ``(6) an Asian and Pacific Islander-serving institution (as 
        defined in subsection (c)).
  ``(b) New Investment of Funds.--
          ``(1) In general.--There shall be available to the Secretary 
        to carry out this section, from funds not otherwise 
        appropriated, $100,000,000 for each of the fiscal years 2008 
        through 2012. The authority to carry out this section shall 
        expire at the end of fiscal year 2012.
          ``(2) Allocation and allotment.--
                  ``(A) In general.--Of the amounts made available 
                under paragraph (1) for any fiscal year--
                          ``(i) 40 percent shall be available for 
                        allocation under subparagraph (B);
                          ``(ii) 40 percent shall be available for 
                        allocation under subparagraph (C); and
                          ``(iii) 20 percent shall be available for 
                        allocation under subparagraph (D).
                  ``(B) HSI stem and articulation programs.--The amount 
                made available for allocation under this subparagraph 
                by subparagraph (A)(i) for any fiscal year shall be 
                available for Hispanic-serving Institutions for 
                activities described in section 503, with a priority 
                given to applications that propose--
                          ``(i) to increase the number of Hispanic and 
                        other low income students attaining degrees in 
                        the fields of science, technology, engineering 
                        and mathematics; and
                          ``(ii) to develop model transfer and 
                        articulation agreements between 2-year 
                        Hispanic-serving institutions and 4-year 
                        institutions in such fields.
                  ``(C) Allocation and allotment hbcus and pbis.--From 
                the amount made available for allocation under this 
                subparagraph by subparagraph (A)(ii) for any fiscal 
                year--
                          ``(i) $34,000,000 shall be available to 
                        eligible institutions described in subsection 
                        (a)(1) and shall be made available as grants 
                        under section 323 and allotted among such 
                        institutions under section 324, treating such 
                        amount, plus the amount appropriated for such 
                        fiscal year in a regular or supplemental 
                        appropriation Act to carry out part B of title 
                        III, as the amount appropriated to carry out 
                        part B of title III for purposes of allotments 
                        under section 324, for use by such institutions 
                        with a priority for--
                                  ``(I) activities described in 
                                paragraphs (1), (2), (4), (5), and (10) 
                                of section 323(a); and
                                  ``(II) other activities, consistent 
                                with the institution's comprehensive 
                                plan and designed to increase the 
                                institution's capacity to prepare 
                                students for careers in the physical 
                                and natural sciences, mathematics, 
                                computer science and information 
                                technology and sciences, engineering, 
                                language instruction in the less-
                                commonly taught languages and 
                                international affairs, and nursing and 
                                allied health professions; and
                          ``(ii) $6,000,000 shall be available to 
                        eligible institutions described in subsection 
                        (a)(5) and shall be available for a competitive 
                        grant program to award 10 grants of $600,000 
                        annually for programs in the following areas: 
                        science, technology, engineering, or 
                        mathematics (STEM); health education; 
                        internationalization or globalization; teacher 
                        preparation; or improving educational outcomes 
                        of African American males.
                  ``(D) Allocation and allotment to other minority-
                serving institutions.--From the amount made available 
                for allocation under this subparagraph by subparagraph 
                (A)(iii) for any fiscal year (in this subparagraph 
                referred to as the `allocable amount')--
                          ``(i) 60 percent of the allocable amount for 
                        such fiscal year shall be available to eligible 
                        institutions described in subsection (a)(3) and 
                        shall be made available as grants under section 
                        316, treating such 60 percent of the allocable 
                        amount as part of the amount appropriated for 
                        such fiscal year in a regular or supplemental 
                        appropriation Act to carry out such section, 
                        and using such 60 percent for purposes 
                        described in subsection (c) of such section;
                          ``(ii) 30 percent of the allocable amount for 
                        such fiscal year shall be available to eligible 
                        institutions described in subsection (a)(4) and 
                        shall be made available as grants under section 
                        317, treating such 30 percent of the allocable 
                        amount as part of the amount appropriated for 
                        such fiscal year in a regular or supplemental 
                        appropriation Act to carry out such section and 
                        using such 60 percent for purposes described in 
                        subsection (a) of such section; and
                          ``(iii) 10 percent of the allocable amount 
                        for such fiscal year shall be available to 
                        eligible institutions described in subsection 
                        (a)(6) for activities described in section 
                        311(c).
  ``(c) Definitions.--
          ``(1) Predominantly black institution.--The term 
        `Predominantly Black institution' means an institution of 
        higher education that--
                  ``(A) has an enrollment of needy undergraduate 
                students as required and defined by paragraph (2);
                  ``(B) has an average educational and general 
                expenditure which is low, per full-time equivalent 
                undergraduate student in comparison with the average 
                educational and general expenditure per full-time 
                equivalent undergraduate student of institutions that 
                offer similar instruction, except that the Secretary 
                may apply the waiver requirements described in section 
                392(b) to this subparagraph in the same manner as the 
                Secretary applies the waiver requirements to section 
                312(b)(1)(B);
                  ``(C) has an enrollment of undergraduate students--
                          ``(i) that is at least 40 percent Black 
                        American students;
                          ``(ii) that is at least 1,000 undergraduate 
                        students;
                          ``(iii) of which not less than 50 percent of 
                        the undergraduate students enrolled at the 
                        institution are low-income individuals or 
                        first-generation college students (as that term 
                        is defined in section 402A(g)); and
                          ``(iv) of which not less than 50 percent of 
                        the undergraduate students are enrolled in an 
                        educational program leading to a bachelor's or 
                        associate's degree that the institution is 
                        licensed to award by the State in which it is 
                        located;
                  ``(D) is legally authorized to provide, and provides 
                within the State, an educational program for which the 
                institution of higher education awards a bachelors 
                degree, or in the case of a junior or community 
                college, an associate's degree;
                  ``(E) is accredited by a nationally recognized 
                accrediting agency or association determined by the 
                Secretary to be a reliable authority as to the quality 
                of training offered, or is, according to such an agency 
                or association, making reasonable progress toward 
                accreditation; and
                  ``(F) is not receiving assistance under part B of 
                title III.
          ``(2) Enrollment of needy students.--The term `enrollment of 
        needy students' means the enrollment at an eligible institution 
        with respect to which not less than 50 percent of the 
        undergraduate students enrolled in an academic program leading 
        to a degree--
                  ``(A) in the second fiscal year preceding the fiscal 
                year for which the determination is made, were Federal 
                Pell Grant recipients for such year;
                  ``(B) come from families that receive benefits under 
                a means-tested Federal benefits program (as defined in 
                paragraph (4));
                  ``(C) attended a public or nonprofit private 
                secondary school--
                          ``(i) that is in the school district of a 
                        local educational agency that was eligible for 
                        assistance under part A of title I of the 
                        Elementary and Secondary Education Act of 1965 
                        for any year during which the student attended 
                        such secondary school; and
                          ``(ii) which for the purpose of this 
                        paragraph and for that year was determined by 
                        the Secretary (pursuant to regulations and 
                        after consultation with the State educational 
                        agency of the State in which the school is 
                        located) to be a school in which the enrollment 
                        of children counted under section 1113(a)(5) of 
                        such Act exceeds 30 percent of the total 
                        enrollment of such school; or
                  ``(D) are first-generation college students (as that 
                term is defined in section 402A(g)), and a majority of 
                such first-generation college students are low-income 
                individuals.
          ``(3) Low-income individual.--The term `low-income 
        individual' has the meaning given such term in section 402A(g).
          ``(4) Means-tested federal benefit program.--The term `means-
        tested Federal benefit program' means a program of the Federal 
        Government, other than a program under title IV, in which 
        eligibility for the programs' benefits, or the amount of such 
        benefits, or both, are determined on the basis of income or 
        resources of the individual or family seeking the benefit.
          ``(5) Asian american and pacific islander-serving 
        institution.--The term `Asian American and Pacific Islander-
        serving institution' means an institution of higher education 
        that--
                  ``(A) is an eligible institution under section 
                312(b); and
                  ``(B) at the time of application, has an enrollment 
                of undergraduate students that is at least 10 percent 
                Asian American and Pacific Islander students from 
                subgroups with low levels of college degree attainment.
          ``(6) Asian american.--The term `Asian American' has the 
        meaning given the term `Asian' in the Office of Management and 
        Budget's Standards for Maintaining, Collecting, and Presenting 
        Federal Data on Race and Ethnicity as published on October 30, 
        1997 (62 Fed. Reg. 58789).
          ``(7) Pacific islander.--The term `Pacific Islander' has the 
        meaning given the term `Native Hawaiian' or `Other Pacific 
        Islander' in such Standards for Maintaining, Collecting, and 
        Presenting Federal Data on Race and Ethnicity.
          ``(8) Low levels of college degree attainment.--The term `low 
        levels of college degree attainment' mean college degree 
        attainment that is less than 20 percent for adults ages 25 
        through 29 as reported by the National Center for Educational 
        Statistics.
  ``(d) Termination of Authority.--The authority to carry out this 
section expires at the end of fiscal year 2012.''.

                PART B--COLLEGE ACCESS CHALLENGE GRANTS

SEC. 411. COLLEGE ACCESS CHALLENGE GRANTS.

  (a) Challenge Grant Program Established.--
          (1) Program established.--The Secretary shall establish a 
        program to award matching grants to increase the number of 
        eligible students from underserved populations who enter and 
        complete college by providing grants to philanthropic 
        organizations who are members of eligible consortia to carry 
        out the activities of the consortia to achieve this purpose, 
        including--
                  (A) providing need-based grants to eligible students;
                  (B) providing support to eligible students through 
                school- or institution-based mentoring programs; and
                  (C) conducting outreach programs to encourage 
                eligible students to pursue higher education.
          (2) Grant period; renewability.--Grants under this section 
        shall be awarded for one 5-year period, and may not be renewed.
          (3) Grant amounts.--
                  (A) In general.--A grant awarded under this part for 
                a given fiscal year to a philanthropic organization 
                shall be in an amount equal to the lesser of--
                          (i) 200 percent of the amount of charitable 
                        gifts received in the preceding fiscal year by 
                        the eligible consortia, including charitable 
                        gifts received by the individual members of the 
                        consortia with which the philanthropic 
                        organization is associated; or
                          (ii) the maximum grant amount established by 
                        the Secretary by regulation, pursuant to 
                        subsection (f).
                  (B) Gifts provided in cash or in-kind.--For the 
                purposes of subparagraph (A), the charitable gifts 
                received by an eligible consortia and its members may 
                be provided in cash or in-kind, including physical non-
                cash contributions of monetary value such as property, 
                facilities, and equipment, but excluding services.
  (b) Uses of Grant.--
          (1) In general.--A philanthropic organization receiving a 
        grant under this section shall--
                  (A) provide grants to eligible students; and
                  (B) distribute grants to members of the consortia 
                with which the philanthropic organization is 
                affiliated, in accordance with the plan described in 
                subsection (c)(2)(A), to fund the activities of such 
                consortia in accordance with the application under 
                subsection (c).
          (2) Limitation.--Not more than 15 percent of the funds made 
        available annually through a grant under this section may be 
        used for administrative purposes.
  (c) Applications.--A philanthropic organization desiring a grant 
under this section shall submit an application to the Secretary at such 
time, in such manner, and containing such information as the Secretary 
may require. Such application shall include the following:
          (1) A description of an eligible consortia that meets the 
        requirements of subsection (d), with which the philanthropic 
        organization is affiliated, in accordance with subsection (g).
          (2) A detailed description of--
                  (A) the philanthropic organization's plans for 
                distributing the matching grant funds among the members 
                of the eligible consortia; and
                  (B) the eligible consortia's plans for using the 
                matching grant funds, including how the funds will be 
                used to provide financial aid, mentoring, and outreach 
                programs to eligible students.
          (3) A plan to ensure the viability of the eligible consortia 
        and the work of the consortia beyond the grant period.
          (4) A detailed description of the activities that carry out 
        this section that are conducted by the eligible consortia at 
        the time of the application, and how the matching grant funds 
        will assist the eligible consortia with expanding and enhancing 
        such activities.
          (5) A description of the organizational structure that will 
        be used to administer the activities carried out under the 
        plan, including a description of the system used to track the 
        participation of students who receive grants to degree 
        completion.
          (6) A description of the strategies that will be used to 
        identify eligible students who are enrolled in secondary school 
        and who may benefit from the activities of the eligible 
        consortia.
  (d) Eligible Consortia.--An eligible consortia with which a 
philanthropic organization is affiliated for the program under this 
section shall--
          (1) be a partnership of mulitple entities that have agreed to 
        work together to carry out this section, including--
                  (A) such philanthropic organization, which shall 
                serve as the manager of the consortia;
                  (B) a State that demonstrates a commitment to 
                ensuring the creation of a Statewide system to address 
                the issues of early intervention and financial support 
                for eligible students to enter and remain in college; 
                and
                  (C) at the discretion of the philanthropic 
                organization described in subparagraph (A), additional 
                partners, including other non-profit organizations, 
                government entities (including local municipalities, 
                school districts, cities, and counties), institutions 
                of higher education, and other public or private 
                programs that provide mentoring or outreach programs; 
                and
          (2) conduct activites to assist eligible students with 
        entering and remaining in college, which include--
                  (A) providing need-based grants to eligible students;
                  (B) providing early notification to low-income 
                students of their potential eligibility for Federal 
                financial aid (which may include assisting students and 
                families with filling out FAFSA forms), as well as 
                financial aid and other support available from the 
                eligible consortia;
                  (C) encouraging increased eligible student 
                participation in higher education through mentoring or 
                outreach programs; and
                  (D) conducting marketing and outreach efforts that 
                are designed to--
                          (i) encourage full participation of eligible 
                        students in the activities of the consortia 
                        that carry out this section; and
                          (ii) provide the communities impacted by the 
                        activities of the consortia with a general 
                        knowledge about the efforts of the consortia.
  (e) Annual Report.--A philanthropic organization receiving a grant 
under this section shall prepare and submit an annual report to the 
Secretary on the activities carried out with such grant. The report 
shall include--
          (1) each activity or service that was provided to eligible 
        students over the course of the year;
          (2) the cost of providing each such activity or service;
          (3) the number and percentage of eligible students who 
        received grants, mentoring, and outreach services; and
          (4) the total amount of charitable gifts received by the 
        eligible consortia (including its members) with which the 
        philanthropic organization is affiliated for the fiscal year.
  (f) Regulations.--The Secretary shall promulgate regulations to carry 
out this section. Such regulations shall include--
          (1) the maximum grant amount that may be awarded to a 
        philanthropic organization under this section;
          (2) the minimum amount of chartable gifts an eligible 
        consortia (including its members) shall receive in a fiscal 
        year for the philanthropic organization affiliated with such 
        consortia to be eligible for a grant under this section.
  (g) Definitions.--For the purposes of this section:
          (1) Eligible student.--The term ``eligible student'' means an 
        individual who--
                  (A) is a member of an underserved population;
                  (B) is enrolled--
                          (i) in a secondary school pursuing a high 
                        school diploma; or
                          (ii) in an institution of higher education or 
                        is planning to attend an institution of higher 
                        education; and
                  (C) either--
                          (i) is receiving, or has received, financial 
                        assistance or support services from the 
                        consortium; or
                          (ii) meets 2 or more of the following 
                        criteria:
                                  (I) Has an expected family 
                                contribution equal to zero (as 
                                described in section 479 of the Higher 
                                Education Act of 1965) or a comparable 
                                alternative based upon the State's 
                                approved criteria in section 415C(b)(4) 
                                of such Act.
                                  (II) Has qualified for a free lunch, 
                                or at the State's discretion a reduced 
                                price lunch, under the school lunch 
                                program established under the Richard 
                                B. Russell National School Lunch Act.
                                  (III) Qualifies for the State's 
                                maximum need-based undergraduate award.
                                  (IV) Is participating in, or has 
                                participated in, a Federal, State, 
                                institutional, or community mentoring 
                                or outreach program, as recognized by 
                                the eligible consortia carrying out 
                                activities under this section.
          (2) Philanthropic organization.--The term ``philanthropic 
        organization'' means a non-profit organization--
                  (A) that does not receive funds under title IV of the 
                Higher Education Act of 1965 or under the Elementary 
                and Secondary Education Act of 1965;
                  (B) that is not a local educational agency or an 
                insitution of higher education;
                  (C) that has a demonstrated record of dispersing 
                grant aid to underserved populations to ensure access 
                to, and participation in, higher education;
                  (D) that is affiliated with an eligible consortia (as 
                defined in subsection (d)) to carry out this section; 
                and
                  (E) the primary purpose of which is to provide 
                financial aid and support services to students from 
                underrepresented populations to increase the number of 
                such students who enter and remain in college.
          (3) State.--The term ``State'' means each of the several 
        States of the United States, the District of Columbia, and 
        Puerto Rico.
          (4) Underserved population.--The term ``underserved 
        population'' means a group of individuals who traditionally 
        have not been well represented in the general population of 
        students who pursue and successfully complete a higher 
        education degree.
  (h) Program Funding.--
          (1) In general.--There shall be available to the Secretary to 
        carry out this section, from funds not otherwise appropriated, 
        $300,000,000 for the period beginning with fiscal year 2008 and 
        ending with fiscal year 2012.
          (2) Use of excess funds.--If, at the end of a fiscal year, 
        the funds available for awarding grants under this section 
        exceed the amount necessary to make such grants, then all of 
        the excess funds shall remain available for the subsequent 
        fiscal year, and shall be used to award grants under section 
        401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) for 
        such subsequent fiscal year.
  (i) Sunset.--The authority to carry out this section shall expire at 
the end of fiscal year 2012.

                          PART C--UPWARD BOUND

SEC. 412. UPWARD BOUND.

  (a) Absolute Priority Prohibited in Upward Bound Program.--Section 
402C (20 U.S.C. 1070a-13) is amended by adding at the end the following 
new subsection:
  ``(f) Absolute Priority Prohibited in Upward Bound Program.--Except 
as otherwise expressly provided by amendment to this section, the 
Secretary shall not implement or enforce, and shall rescind, the 
absolute priority for Upward Bound Program participant selection and 
evaluation published by the Department of Education in the Federal 
Register on September 22, 2006 (71 Fed. Reg. 55447 et seq.).''.
  (b) Additional Funds.--Section 402C is further amended by adding 
after subsection (f) (as added by subsection (a)) the following new 
subsection:
  ``(g) Additional Funds.--
          ``(1) Authorization and appropriation.--There are authorized 
        to be appropriated, and there are appropriated to the 
        Secretary, from funds not otherwise appropriated, $30,000,000 
        for each of the fiscal years 2008 through 2011 to carry out 
        paragraph (2), except that any amounts that remain unexpended 
        for such purpose for each of such fiscal years may be available 
        for technical assistance and administration costs for the 
        Upward Bound program.
          ``(2) Use of funds.--The amounts made available by paragraph 
        (1) shall be available to provide assistance to all Upward 
        Bound projects that received assistance in fiscal year 2006 but 
        that did not receive assistance in fiscal year 2007 (other than 
        new applicants) with a grant score above 70. Such assistance 
        shall be made available in the form of 4-year grants.''.

                     TITLE V--ADDITIONAL PROVISIONS

SEC. 501. INDEPENDENT EVALUATION OF DISTANCE EDUCATION PROGRAMS.

  (a) Independent Evaluation.--The Secretary of Education shall enter 
into an agreement with the National Academy of Sciences to conduct a 
scientifically correct and statistically valid evaluation of the 
quality of distance education programs, as compared to campus-based 
education programs, at institutions of higher education. Such 
evaluation shall include--
          (1) identification of the elements by which the quality of 
        distance education, as compared to campus-based education, can 
        be assessed, including elements such as subject matter, 
        interactivity, and student outcomes;
          (2) identification of distance and campus-based education 
        program success, with respect to student achievement, in 
        relation to the mission of the institution of higher education; 
        and
          (3) identification of the types of students (including 
        classification of types of students based on student age) who 
        most benefit from distance education programs, the types of 
        students who most benefit from campus-based education programs, 
        and the types of students who do not benefit from distance 
        education programs, by assessing elements including access to 
        higher education, job placement rates, undergraduate graduation 
        rates, and graduate and professional degree attainment rates.
  (b) Scope.--The National Academy of Sciences shall select for 
participation in the evaluation under subsection (a) a diverse group of 
institutions of higher education with respect to size, mission, and 
geographic distribution.
  (c) Interim and Final Reports.--The agreement under subsection (a) 
shall require that the National Academy of Sciences submit to the 
Secretary of Education, the Committee on Health, Education, Labor and 
Pensions of the Senate, and the Committee on Education and Labor of the 
House of Representatives--
          (1) an interim report regarding the evaluation under 
        subsection (a) not later than December 31, 2007; and
          (2) a final report regarding such evaluation not later than 
        December 31, 2009.
  (d) Appropriations.--There shall be available to the Secretary, from 
funds not otherwise appropriated, $100,000 to carry out this section.

SEC. 502. ENCOURAGING COLLEGES AND UNIVERSITIES TO ``GO GREEN''.

  (a) Findings.--The Committee on Education and Labor of the House of 
Representatives makes the following findings:
          (1) A commitment to and academic programs for environmental 
        and economic sustainability are essential for our Nation's 
        future prosperity.
          (2) The more than 4,200 higher education institutions in the 
        United States have the capacity to innovatively leverage 
        spending and change consumption patterns by incorporating 
        concepts of sustainability into their academic programs and by 
        modeling sustainable economic and environmental practices for 
        their communities.
          (3) Many colleges and universities have interdisciplinary 
        programs or centers focusing on equipping students with the 
        academic content knowledge needed to understand concepts of 
        sustainability and ``going green''.
          (4) Many colleges and universities have programs related to 
        the research of sustainability and sustainable systems.
          (5) Academic programs related to sustainability vary in rigor 
        because no national education content standards for academic 
        sustainability programs currently exist.
          (6) Colleges and universities may partner with businesses to 
        encourage students and faculty to translate academic learning 
        and research into practical solutions that promote 
        sustainability.
          (7) Colleges and universities that make an effort to reduce 
        energy consumption and promote environmental sustainability not 
        only reduce their own emissions, but also motivate the leaders 
        of the next generation to action and create technical skills 
        and resources to develop innovative solutions.
          (8) Many colleges and universities have undertaken detailed, 
        campus-wide assessments of their progress toward ``going 
        green'' and sustainability or have measured their progress in 
        specific sectors, such as operations, or specific parameters, 
        such as recycling, energy, and water consumption.
          (9) No system that evaluates and compares college and 
        university campuses in terms of overall sustainability-related 
        academic programs and practices currently exists.
  (b) Sense of the Committee on Education and Labor.--It is the sense 
of the Committee on Education and Labor that in order to encourage 
increased public awareness of the need to ``go green'' by using 
sustainable economic and environmental practices and rigorous 
sustainability academic programs on college and university campuses, 
the following should be encouraged:
          (1) The development of educational standards by institutions 
        of higher education to determine the necessary rigor and 
        effectiveness of academic sustainability programs.
          (2) Public awareness of the need for ``going green'' by using 
        sustainable economic and environmental practices.
          (3) Non-governmental efforts to improve economic and 
        environmental sustainability efforts on college and university 
        campuses, including holding national summits to share best 
        practices.
          (4) Collaborative partnerships between Federal agencies, 
        businesses, universities and communities to broaden 
        sustainability practices.

                               I. Purpose

    The purpose of H.R. 2669, the ``College Cost Reduction Act 
of 2007,'' is to provide for reconciliation pursuant to section 
601 of the concurrent resolution on the budget for fiscal year 
2008.

                          II. Committee Action


                             110TH CONGRESS

Introduction of the College Cost Reduction Act

    On Tuesday, June 12, 2007, Representatives George Miller 
(D-CA) and Ruben Hinojosa (D-TX) introduced H.R. 2669, the 
College Cost Reduction Act of 2007, a bill to provide for 
reconciliation pursuant to section 601 of the concurrent 
resolution on the budget for fiscal year 2008.

Full Committee markup of H.R. 2669

    On Wednesday, June 13, 2007, the Committee on Education and 
Labor considered H.R. 2669 in legislative session, and reported 
the bill favorably, as amended, to the House of 
Representatives. The rollcall vote was 30-16. Chairman Miller 
offered an amendment in the nature of a substitute.
    The amendment in the nature of a substitute contained minor 
technical changes and the following additions to H.R. 2669:
    
 Extends a fee elimination provided for small 
lenders in H.R. 2669 to non-profit lenders, in support of their 
unique mission, by eliminating the current lender-paid 
origination fee of 0.5%.
    
 Provides mandatory financial support of $500 
million, to Historically Black Colleges and Universities 
(HBCUs), and Hispanic-Serving Institutions (HSIs), Tribal 
Colleges and Universities (TCUs), Alaska/Hawaiian Native 
Institutions and newly defined Predominately Black Institutions 
(PBIs) and institutions serving Asian American and Pacific 
Islanders.
    
 Clarifies that students attending institutions 
that measure academic years by quarters or the equivalent are 
able to participate in the Year Round Pell Grant program on the 
same basis as students attending institutions that measure 
academic years by semesters.
    
 Makes students attending either a non-profit or a 
for-profit institution eligible to receive TEACH grants.
    
 Allows the Secretary of Education to issue waivers 
to states that experience a fiscal crisis exempting them from 
certain requirements with respect to demonstrating their 
commitment to higher education funding.
    
 Replaces the Consumer Price Index in Section 202, 
with the Higher Education Price Index referenced in Section 203 
of the bill.
    
 Strikes the Quality Efficiency Task Forces in 
Section 202 of the bill.
    
 Narrows the definition of a ``public sector'' 
employee in Section 131 by targeting resources to those serving 
in areas of national need by deleting ``government'' while 
keeping the remainder of the listed categories: public safety 
(including first responders, firefighters, police officers, or 
other law enforcement or public safety officers), emergency 
management (including emergency medical technicians), public 
health and public interest legal services (including 
prosecutors and public defenders).
    The Committee adopted the following amendments:
    1. An amendment offered by Mr. Bishop (NY) and Mr. Altmire 
(PA), adopted by voice vote. The amendment provides $500 
million in Federal capital contributions for the Perkins Loan 
Program for fiscal years 2008-2012.
    2. An amendment offered by Mr. Yarmuth (KY) and Mr. Tierney 
(MA) adopted by voice vote. The amendment changes the $5,000 
loan-forgiveness program to provide $1,000 per year of loan 
forgiveness for up to 5 years, rather than $5,000 of loan 
forgiveness after 5 years of service.
    3. Amendments offered en bloc by Mr. Ehlers (MI) adopted by 
voice vote. The amendments call for a study by the National 
Academy of Sciences of the quality of distance education 
programs and encourage institutions to adopt and promote 
sustainable economic and environmental practices and rigorous 
sustainability academic programs.
    4. An amendment by Mrs. Susan Davis (CA) adopted by voice 
vote. The amendment allows veterans who were enrolled in or 
left college within six months of deployment, to receive 
extended repayment on loan terms of up to 13 months upon return 
from active duty.
    5. Amendments offered en bloc by Mr. Petri (WI) adopted by 
voice vote. One amendment proposes a study for the purpose of 
designing an income contingent repayment plan using the IRS' 
income tax withholding system. The second amendment proposes a 
study to identify and select an auction-based mechanism of 
setting student loan lender yields under the FFEL program and 
to pilot and evaluate the use of such a mechanism.
    6. An amendment offered by Mr. Scott (VA) adopted by voice 
vote. The amendment restores Upward Bound funding to unfunded 
programs from the FY07 competition.
    7. An amendment offered by Mr. Loebsack (IA) adopted by 
voice vote. The amendment allows part-time students and 
students in certificate programs to participate in the Year 
Round Pell Grant program.
    8. An amendment offered by Mr. Grijalva (AZ) adopted by 
voice vote. The amendment expands the definition of an eligible 
student for Academic Competitiveness grants to include legal 
permanent residents, part-time students, and students in 
certificate programs.
    9. An amendment offered by Mr. Scott (VA) adopted by voice 
vote. The amendment restricts the Secretary's use of funds for 
the purpose of evaluating the Upward Bound program and applying 
a new ``absolute priority'' for student eligibility to future 
competitions.
    10. An amendment offered by Mr. Courtney (CT), Ms. Shea-
Porter (NH), and Mr. Danny Davis (IL) adopted by voice vote. 
The amendment provides an additional increase of $100 for Pell 
Grants to the first year, bringing the total available in the 
2008-2009 academic year to $200, and bringing the total 
available in the 2011-2012 academic year to $500.
    The Committee rejected four amendments by rollcall vote.

                        III. Summary of the Bill


                                PURPOSE

    The purpose of H.R. 2669, the College Cost Reduction Act of 
2007, is to provide for reconciliation pursuant to section 601 
of the concurrent resolution on the budget for fiscal year 
2008, and to ensure access to and success in higher education 
by making college more affordable.

                                FUNDING

    Under the Concurrent Resolution on the Budget for Fiscal 
Year 2008, the Committee on Education and Labor was instructed 
to report reconciliation provisions sufficient to reduce the 
deficit by $750 million for the period of fiscal years 2007 
through 2012. The College Cost Reduction Act of 2007achieves 
nearly $19 billion in savings by cutting excess subsidies paid 
by the federal government to lenders in the student loan 
industry. The bill invests approximately $18.25 billion in 
students and families to assist them in accessing, attending, 
and financing college. Moreover, the bill provides $750 million 
in deficit reduction to meet the obligation under the 
instructions by the Budget Committee.

       INCREASED FUNDING AND SUPPORT FOR PELL GRANT SCHOLARSHIPS

    The College Cost Reduction Act of 2007 provides an extra 
$500 Pell Grant, using mandatory funds, phased in over four 
years that would be added to the appropriated amount. With the 
current appropriated amount of $4,700, announced by Chairman 
Obey on June 7, 2007, students are guaranteed at least $4,900 
and up to $5,200 by 2011.
    This legislation also eliminates the tuition sensitivity 
provisions that unfairly penalize students attending low-cost 
tuition institutions.
    H.R. 2669 establishes a year-round Pell Grant program, and 
increases the Income Protection Allowance for dependent and 
independent students.
    In addition to changing the Income Protection Allowance, 
the legislation also amends the needs analysis formula to 
increase the ``auto-zero'' family contribution from the current 
$20,000 level to $30,000.

            INTEREST RATE CUTS FOR SUBSIDIZED STUDENT LOANS

    The legislation includes the provision from H.R. 5, the 
College Student Relief Act, to cut interest rates in half for 
undergraduate students with subsidized student loans--those in 
most financial need--over the next five years. This provision 
alone will save a student with $13,800 in subsidized loan debt 
approximately $4,400 over the life of her loan.

     INCREASED LOAN LIMITS AND PROGRAMS TO MANAGE STUDENT LOAN DEBT

    In addition to cutting interest rates in half, the College 
Cost Reduction Act will also increase the borrowing limits for 
third and fourth year students to $7,500, and increase the 
aggregate borrowing limit for undergraduates to $30,500 and for 
graduates to $65,500.
    Included in this legislation is an Income-Based Repayment 
proposal, which builds on the tenets of the Federal Direct Loan 
Program's Income Contingent Repayment program by guaranteeing 
that borrowers will not have to pay more than 15% of their 
discretionary adjusted gross income in student loan repayments.

           PROMOTING PUBLIC SERVICE THROUGH LOAN FORGIVENESS

    This bill includes language to provide complete loan 
forgiveness for public sector employees after 10 years of 
service.
    In keeping with alleviating student loan debt, the College 
Cost Reduction Act also includes $5,000 in loan forgiveness for 
those serving the country in critical areas including first 
responders, law enforcement officers, firefighters, nurses, 
public defenders, prosecutors, early childhood educators, 
nurses, librarians and other public sector employees. For each 
year of service, $1,000 of the borrowers' loans will be 
forgiven, up to a total of $5,000.

                        CONTAINING COLLEGE COSTS

    With college tuition skyrocketing, the bill includes 
several provisions to address college costs. Specifically, the 
legislation includes a provision to ensure that states maintain 
their commitments to helping students and families pay for 
college. States are discouraged from reducing funding for 
higher education as family and federal support increases.
    This legislation offers incentives, in the form of 
additional mandatory Pell Grant funds for schools that keep 
their annual net tuition increases at a rate equal to, or 
below, the increases in the Higher Education Price Index (HEPI) 
for a given academic year.
    The bill also includes provisions that will ensure the 
redesign of the existing U.S. Department of Education College 
Opportunity Online Locator (COOL) website, making it easier to 
use for parents and students while not adding burdensome 
reporting requirements for colleges and universities.
    Additionally, the bill establishes grants called 
``Cooperative Education Rewards'' for institutions or consortia 
of institutions that provide students with both academic and 
work experiences in order to prepare them for their future 
careers and to help students support themselves financially 
while in school.

         ENSURING A HIGHLY QUALIFIED TEACHER IN EVERY CLASSROOM

    H.R. 2669 makes historic investments to ensure that we 
place a highly qualified teacher in every classroom through the 
creation of TEACH grants that would provide up-front pre-paid 
tuition assistance of $4,000/year (with a maximum of $16,000) 
for high-achieving graduate and undergraduate students who 
commit to teaching a high-need subject in a high-need school 
for four years.
    This provision meets one of the goals outlined in the House 
Democrats Innovation Agenda introduced in the last Congress to 
ensure highly qualified teachers are well trained and prepared 
to teach in the fields of math, science, and technology.
    The bill also establishes Centers of Excellence to provide 
funds to Minority Serving Institutions to help recruit and 
prepare teachers and to expand opportunities for Americans of 
all educational, ethnic, class, and geographic backgrounds to 
become highly qualified teachers.

  INVESTING IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES, HISPANIC 
         SERVING INSTITUTIONS AND MINORITY SERVING INSTITUTIONS

    H.R. 2669 makes a deliberate and landmark investment of 
$500 million in HBCUs, HSIs, PBIs, TCUs, Alaska Native and 
Native Hawaiian institutions, and institutions serving Asian 
Americans and Pacific Islanders to ensure that students 
attending these institutions will not only enter college, but 
remain and graduate.

   PROMOTING PUBLIC-PRIVATE PARTNERSHIPS TO PROVIDE SCHOLARSHIPS FOR 
                                COLLEGE

    This legislation establishes the College Access Challenge 
Grants which will leverage federal funds to increase the number 
of students from underserved populations who enter and complete 
college through matching grants to philanthropic organizations. 
The federal government will provide a 2 to 1 match for private 
and other public funds for these purposes.

        IDENTIFYING INEFFICIENCIES IN THE STUDENT LOAN SUBSIDIES

    The bill is fully paid for with cuts to excess lender 
subsidies and builds on the proposals contained in both H.R. 5 
and the President's fiscal year 2008 budget.
    
 Four of the six offsets have already been approved 
by the House this year, when it overwhelmingly voted to pass 
the College Student Relief Act of 2007 (H.R. 5) in January.
    
 Four of the six offsets have been proposed in the 
President's fiscal year 2008 budget.
    Decrease lender Special Allowance Payment (SAP) rate by 
0.55 percentage point: The Special Allowance Payment is the 
subsidy paid to lenders over and above their cost of money. 
Currently, the SAP is 2.34 percentage points (234 basis 
points). The College Cost Reduction Act includes a 0.55 
percentage point (or 55 basis point) reduction in the SAP 
payment.
    In his FY 2008 budget, President Bush proposed decreasing 
the SAP rate by 50 basis points.
    Lower lender insurance rates from 97% to 95%: When a 
student or parent defaults on a loan, the government pays the 
lender this share of the owed funds.
    The House passed this offset as part of H.R. 5 and it was 
also proposed in the President's FY 2008 budget. The Education 
Department estimates that approximately 5% of loans default.
    Eliminate ``Exceptional Performer'' lender status: Lenders 
may be designated on an annual basis as ``exceptional 
performers'' by the Secretary of Education if they are in 
substantial compliance with loan servicing or ``due diligence'' 
requirements. This status is nothing more than a reward to 
lenders for merely doing their job, rather than for engaging in 
any exceptional activity. Lenders designated as ``exceptional 
performers'' receive a two-percentage-point higher insurance 
rate.
    The House passed this offset as part of H.R. 5.
    Increase for-profit lender origination fees from 0.5% to 1% 
and eliminate fees for small and non-profit lenders: Lenders 
are currently charged a fee of 0.5% on all new loans to 
partially offset the federal cost of administering the FFEL 
program.
    The House passed a similar offset in H.R. 5. The President 
proposed a similar provision in his FY 2008 budget.
    Lower guaranty agency collection fees to 16%: Guaranty 
agencies now retain 23% of the funds they collect from 
defaulted loans, partly to cover the cost of collection. But 
guaranty agencies' collection methods have become more 
efficient, thus reducing collection costs. The Education 
Department projects that these efficiencies will continue to 
increase. The Department pays only 16% of amounts collected by 
its private sector contractors in the Direct Loan program.
    The President proposed this offset in his FY 2008 budget. A 
provision to lower the collection fees to 16% by 2010 was 
passed by the House as part of H.R. 5.
    Change the guaranty account maintenance fee: Guaranty 
agencies are paid a fee based on the original principal amount 
of active loans they have guaranteed. This bill shifts this fee 
so that it is tied to the number of accounts lenders have--
which more accurately reflects guarantors' costs.
    The President proposed this change in his FY 2008 budget 
request.

                          IV. Committee Views

    The Congress and the public have long recognized higher 
education as key to promoting economic opportunity for all 
Americans. In 1944, the GI Bill provided educational benefits 
to World War II veterans. In 1965, Congress established the 
foundation of the federal student aid system with the passage 
of the Higher Education Act. In 1972, the Pell Grant program 
was created to provide grants for low-income students to attend 
college. The Committee's action on H.R. 2669, the College Cost 
Reduction Act, continues this historic trend by investing where 
it counts, with our nation's students and their families.
    The Committee strongly believes that federal higher 
education policy should focus on the holistic picture of 
college readiness, access, success, and completion. Therefore, 
policies and investments should not only be directed to ensure 
that students can afford college tuition, but investments--like 
many of those passed in H.R. 2669--should also ensure that all 
qualified students, regardless of their background, be prepared 
for college, have the appropriate information about and access 
to higher education and support services, and graduate to 
achieve their goals.
    As America moves to a more knowledge-based economy, a 
college degree is becoming more essential than ever for basic 
entry-level jobs,\1\ as well as for our country to remain 
competitive on a global scale. The Committee believes that a 
college education is as important today as a high school 
diploma was a generation ago. Yet, students and families are 
faced with the challenge of paying for college. Over the past 
five years, tuition and fees at public colleges and 
universities have increased by 35 percent, and those at the 
private universities have increased by 11 percent.\2\
---------------------------------------------------------------------------
    \1\ Donna Desrochers, Higher Education's Contribution to the 
Knowledge Economy, Solutions for Our Future Project. Accessed June 20, 
2006 at www.solutionsforourfuture.org/site/DocServer/08.Knowledge-
Economy.pdf?docID=103.
    \2\ Trends in Student Aid, The College Board, 2006.
---------------------------------------------------------------------------
    Furthermore, need-based grant aid and other forms of 
federal and state support have been unable to keep pace with 
the increase in college tuition prices. Currently grants only 
make up 48 percent of all student aid.\3\ Recognizing these 
challenges, the goal of helping every qualified student go to 
college should remain the focus.
---------------------------------------------------------------------------
    \3\ IBID
---------------------------------------------------------------------------
    Despite the growing importance of higher education, many 
state governments have cut funding for colleges and 
universities over the past decade.\4\ The failure of states to 
provide adequate support for higher education is compounded by 
the significant lack of increases in federal grant aid, 
resulting in students taking out larger loans to pay for 
college. More than two-thirds of students now borrow to pay for 
college, and their average debt more than doubled between 1993 
and 2004.\5\
---------------------------------------------------------------------------
    \4\ National Conference of State Legislatures, http://www.ncsl.org/
programs/press/2005/pr050428.htm
    \5\ National Center for Education Statistics (NCES), National 
Postsecondary Student Aid Study (NPSAS), 1993 and 2004 undergraduates, 
Data Analysis System (DAS); calculations by the Project on Student 
Debt.
---------------------------------------------------------------------------
    Debt, and the aversion to accumulating debt, is severely 
impacting a student's ability to enter, continue, and complete 
higher education and to make long-range decisions about jobs 
after college. According to the Federal Advisory Committee on 
Student Financial Assistance (ACSFA), limited financial aid and 
declining affordability is already prohibiting hundreds of 
thousands of college-qualified high school graduates from 
attending a four-year institution. Further, over 40 percent of 
those students will not enter postsecondary education at 
all.\6\
---------------------------------------------------------------------------
    \6\ Advisory Committee on Student Financial Assistance, 
``Mortgaging Our Future: How Financial Barriers to College Undercut 
America's Global Competitiveness,'' September 2006.
---------------------------------------------------------------------------

     INCREASING THE PURCHASING POWER OF THE PELL GRANT SCHOLARSHIP

    The Committee believes boosting the nation's investment in 
the Pell Grant program is essential to ensuring access and 
making college more affordable for students and families. 
Research indicates that investment in need-based grant aid is 
the best and most important contribution that the federal 
government can make to keeping the dream of a college education 
a reality for all Americans. However, over the last several 
years, the purchasing power of the Pell Grant has declined. 
Today, the maximum Pell Grant covers only one third of the 
average price of attendance at a public four-year institution 
compared to more than two-thirds in 1980.
    The Pell Grant has recently received a significant boost of 
support since the beginning of the 110th Congress. In February, 
the Appropriations Committee, led by Chairman Obey, increased 
the maximum Pell Grant by $260, from $4,050 to $4,310. This 
increase was the first to be signed into law since 2003, when 
it was raised by $50. At the beginning of June, Chairman Obey 
proposed an additional increase to the Pell Grant for the FY 
2008 appropriations bill, which could bring the maximum Pell 
Grant to $4,700.
    Following suit with these investments in the Pell Grant 
program, the Committee believes a greater and sustainable 
commitment should be made to the Pell Grant through mandatory 
funding. To that end, H.R. 2669 increases the maximum Pell 
Grant scholarship by at least $500 over the next five years, 
ultimately reaching a maximum scholarship of at least $5,200. 
The Pell Grant increases will be phased in with $200 for 2008 
and 2009, $300 for 2010, and $500 for 2011 and beyond. The Pell 
Grant increases provided in this bill will be added to the 
existing maximum Pell Grant set by the Appropriations 
Committee.
    The Committee believes it is critical not only to increase 
the Pell Grant maximum award but also to expand eligibility for 
the grants. H.R. 2669 includes changes to the needs analysis 
formula that is used to calculate a student's financial aid 
award. Specifically, the bill increases the income threshold 
below which families are automatically qualified for maximum 
aid. Under current law, this threshold is set at $20,000. H.R. 
2669 increases the threshold to $30,000. H.R. 2669 makes other 
changes to the needs analysis formula as well, including 
reducing the amount of students' earnings that are considered 
in awarding financial aid, and excluding certain income from 
need determinations, including social security and welfare 
benefits.
    As a result of the increase in the Pell Grant maximum and 
the changes to the needs analysis formula, almost 600,000 
additional students will become eligible to receive a Pell 
Grant by 2011.

    STRENGTHENING THE MIDDLE CLASS BY MAKING COLLEGE MORE AFFORDABLE

Cutting interest rates in half

    In 2006, the House Democrats issued their ``Six in 06'' 
agenda, which included several higher education proposals aimed 
at helping the middle class. A central principle of the agenda 
included cutting student loan interest rates in half. In 
carrying out that agenda, House Democrats, led by members of 
this Committee, championed the initiative on the floor of the 
House. On January 17, 2007, the House of Representatives 
overwhelmingly passed H.R. 5 the College Student Relief Act of 
2007 by a roll call vote of 356-71. The legislation calls for 
cutting interest rates in half, to 3.4 percent, on all 
subsidized student loans over a five year period. This 
provision is included in H.R. 2669.
    Once fully phased in, these interest rate cuts will save 
the typical borrower, with $13,800 in need-based federal 
student loan debt, $4,400 over the life of the loan. Half of 
the student-loan borrowers who would benefit under this 
legislation have family incomes between $26,000 and $68,000, 
according to the Congressional Research Service; the median 
family income of borrowers was $45,000 in 2003-2004. This is 
well below the overall U.S. median family income of 
approximately $54,000, according to the Economic Policy 
Institute.

Increasing loan limits and protecting student and families from 
        unscrupulous practices in the student loan industry

    While loans are not the preferred method of paying for 
college, they are the reality in today's world. To assist 
students and families pay for college, the Committee adopted 
increases in loan limits. In particular, H.R. 2669 increases 
loan limits for third and fourth year students from $5,500 to 
$7,500. Additionally, the aggregate limit increases from the 
current $23,000 to $30,500 for undergraduates and from $65,500 
to $73,000 for graduates.
    The Committee believes that these increases will not only 
help to finance college costs but will allow students and 
families to rely less on costlier private loans. Private loans 
have received increased scrutiny over the last six months in 
light of reported abuses among lenders and financial aid 
officers, including school officials steering students toward 
certain lenders in exchange for financial or other favors. The 
Committee has strong feelings about this issue and, as an 
initial step, passed H.R. 890, the Student Loan Sunshine Act on 
the floor of the House on May 9, 2007 by a roll call vote of 
414-3.The Committee expects to further address the abuses in 
the student loan industry in its consideration of the 
reauthorization of the Higher Education Act during this 
Congress.

Managing student debt to keep college within reach

    The Committee believes that loan limits should only be 
raised in tandem with options for students to manage their 
debt. With students borrowing at record levels, ensuring 
borrower protections and alternative payment options is 
important. According to the Project on Student Debt, ``over the 
past decade, debt levels for graduating seniors with student 
loans more than doubled from $9,250 to $19,200 a 108% increase 
(58% after accounting for inflation).'' \7\ H.R. 2669 builds on 
the existing Income Contingent Repayment Program offered in the 
Direct Loan program and extends this option to individuals 
participating in the FFEL loan program. The Income-Based 
Repayment proposal guarantees that borrowers will not have to 
pay more than 15 percent of their discretionary income in loan 
repayments, and allows borrowers to have their loans forgiven 
after 20 years of payments. Payment options such as the Income-
Based Repayment proposal serve to expand rather than restrict 
educational and economic opportunities for graduates who would 
otherwise be unable to afford to work as teachers or social 
workers.
---------------------------------------------------------------------------
    \7\ Project on Student Debt ``Quick Facts About Student Debt.'' 
http://projectonstudentdebt.org/files/File/
Debt_Facts_and_Sources_5_4_07.pdf
---------------------------------------------------------------------------

               HELPING STUDENTS ENTER COLLEGE AND SUCCEED

    Through H.R. 2669, the Committee has made a deliberate 
decision to invest not only in much needed federal grant aid 
and in interest rate reduction, but also in programs and 
support services that assist students to persist through in 
college to meet their educational goals. With this objective in 
mind, H.R. 2669 makes historic investments in HBCUs and MSIs; 
includes funding for Upward Bound; and strengthens campus-based 
aid programs through mandatory funding of the Perkins loan 
program. Additionally, the Committee believes that investments 
should also be made in building on the successes of numerous 
philanthropic organizations, many of which have a proven track 
record in providing support services and financial assistance 
to help students get into and remain in college.

Making historic new investments in Historically Black Colleges and 
        Universities, and Hispanic-Serving Institutions, Tribal 
        Colleges, Alaska and Hawaiian Native, Predominately Black 
        Institutions, and Asian American and Pacific Islanders

    Historically Black Colleges and Universities, Hispanic-
Serving Institutions, Tribal Colleges, Alaska and Hawaiian 
Native, Predominately Black Institutions, and institutions 
serving Asian American and Pacific Islanders are critical to 
the nation's economic and social well-being. As the growth in 
the nation's population increasingly reflects the diversity of 
the students at these institutions, the Committee believes that 
this mandatory funding is an investment in our future. By 
educating the nation's emerging majority populations, these 
institutions represent the vanguard of the country's potential 
and promise and should be appropriately supported.
    According to the Institute for Higher Education Policy, 
approximately 2.3 million students, or about one-third of all 
African Americans, American Indians/Alaska Natives, and 
Hispanics in all higher education institutions in the United 
States and Puerto Rico, were enrolled at HBCUs, HSIs, TCUs, 
Alaska and Hawaiian Native institutions. These numbers have 
grown rapidly in recent years--in fact, enrollment at these 
institutions accelerated by 66 percent from 1995 to 2003, 
compared to only 20 percent at all postsecondary institutions.
    The importance of these unique institutions is underscored 
by the fact that they provide postsecondary educational 
opportunities specifically tailored to students who 
traditionally have been denied access to adequately funded 
elementary and secondary schools, especially low-income, 
educationally disadvantaged students. Additionally, a high 
proportion of students attending these institutions are the 
first in their family to attend college. In 2003-2004, 43 
percent of students attending an HBCU or HSI were first-
generation students, compared to 35 percent of students 
enrolled at all institutions.
    For far too long, little attention and only nominal 
investments have been directed to institutions funded under 
Title III and Title V of the Higher Education Act. Given the 
years of neglect and lack of support, the Committee believes 
that H.R. 2669 offers an opportunity to help these institutions 
carry out their missions to assist students to meet their 
educational goals.

Promoting persistence through support of Upward Bound

    In order to successfully complete college, students need to 
be adequately prepared both academically and emotionally. The 
Upward Bound program has long provided invaluable academic and 
non-academic services to students who would not otherwise 
receive them, specifically, low-income, first-generation 
students. This program has a broad and significant reach; for 
example, in 2006, Upward Bound served nearly 60,000 students 
across the country. As one of the longest running programs 
authorized by the Higher Education Act, many Upward Bound 
programs become the cornerstone of a community and each year 
successfully help students graduate from high school and enroll 
in institutions of higher education. The Committee strongly 
believes in the purposes and intent of the program, including 
the longevity and continuation of individual programs. To this 
end, H.R. 2669 provides funding to reinstate programs that lost 
their funding in the fiscal year 2007 competition so that 
students, and the communities in which they live, will continue 
to be served.

Helping students pay for college through support of the Perkins Loan 
        Program

    The Perkins Loan Program, created by Congress in 1958, 
started as our country's first federally supported student loan 
program. Throughout the history of the Perkins Loan Program, 
$7.9 billion in federal contributions has been leveraged to 
award over $28.8 billion in loans to students through almost 26 
million aid awards making it one of the most effective public-
private partnerships in the federal government.
    Perkins Loans offer long-term, low-interest rate loans 
targeted to students with exceptional need. More than 500,000 
students received a Perkins Loan last academic year to help pay 
for their education. Given that Perkins loans are designed to 
fill in the need gaps of low-and moderate-income students, the 
Committee believes that without mandatory funding of this 
program, students will be forced to borrow from high-cost 
alternative sources, such as private education loans.

Building support for student retention and financing of college through 
        philanthropic participation

    While government-sponsored grants and loans make up a 
significant part of the financing for higher education for 
students and families, the private sector has demonstrated a 
commitment to the goal of ensuring that students have financial 
support to attend college. A 2005 Institute for Higher 
Education Policy study found that at least $3 billion per year 
is awarded through private scholarship programs. Further, the 
study found that employer-provided education assistance to 
employees and their dependents totals several billion dollars 
more.\8\
---------------------------------------------------------------------------
    \8\ Institute for Higher Education Policy, ``Private Scholarships 
Count,'' May 4, 2005. http://www.ihep.org/
organizations.php3?action=printContentItem&orgid=104&typeID=906&itemID=1
0848&templateID=1418
---------------------------------------------------------------------------
    The Committee believes that the contributions of the 
private sector should be better recognized and supported 
through efforts such as the College Access Challenge Grants, 
established in H.R. 2669. The legislation specifically promotes 
partnerships with federal, state and local government entities 
and philanthropic organizations by establishing matching 
challenge grants aimed at increasing the number of first 
generation and low-income students to attend college.
    The Committee expects that the program will spur new 
interest in the private sector to initiate partnerships, while 
rewarding those organizations that have participated in such 
efforts for some time. The College Access Challenge Grants are 
not intended or designed to supplant the federal government's 
role in providing financial support for students to meet their 
educational goals. Rather, the grants are meant to supplement 
the efforts of the private sector and recognize it as a key 
partner in working to support students and families.

             CONTAINING THE RISING COST OF COLLEGE TUITION

    The Committee believes that the issue of rising college 
tuition must be addressed as part of the overall discussion on 
college affordability and access. While the proposals in H.R. 
2669 are not a comprehensive response to the challenge of 
rising college costs, the Committee believes these initiatives 
serve as a marker to begin the discussion on this important 
issue. As such, the Committee intends to continue this dialogue 
among the major stakeholders and together develop a more 
comprehensive response to skyrocketing tuition at colleges and 
universities during the reauthorization of the Higher Education 
Act.
    Of particular concern to the Committee is the declining 
support that states have provided to higher education, in 
particular during the recessions a few years ago.\9\ Over the 
last few years, higher education has had to compete for 
resources at the state level against other major programs 
including Medicaid and No Child Left Behind. With this in mind, 
the Committee has included a provision mandating that states 
maintain an adequate level of support for higher education to 
ensure continued funding of the state-federal partnership 
program LEAP (Leveraging Education Assistance Program).
---------------------------------------------------------------------------
    \9\ Dennis Jones, ``State Shortfalls Projected to Continue Despite 
Economic Gains,'' National Center for Public Policy and Higher 
Education. February, 2006.
---------------------------------------------------------------------------
    Understanding the challenges that some states are facing as 
a result of uncontrollable circumstances, such as the closure 
of major economic supports in the state or a natural disaster, 
H.R. 2669 includes authority to the Secretary to provide an 
exemption for those states that find themselves in such 
circumstances.
    While the Committee believes that states play a significant 
role in supporting higher education, particularly for public 
institutions, there is a strong belief that initiatives to 
curtail college costs should also include incentives to lower 
tuition. To this end, H.R. 2669 includes additional mandatory 
Pell Grant funds for schools that keep their annual net tuition 
increases at a rate equal to, or below, the increase in the 
Higher Education Price Index (HEPI) for that academic year.
    The Committee is particularly interested in providing 
information to the public on how to best inform themselves 
about the costs at specific institutions. To reach this goal, 
H.R. 2669 ensures the redesign of the existing U.S. Department 
of Education College Opportunity Online Locator (COOL) website, 
making it easier for parents and students to use in order to 
compare schools, while not adding burdensome reporting 
requirements for colleges and universities.

         ENSURING A HIGHLY QUALIFIED TEACHER IN EVERY CLASSROOM

    There are not enough qualified teachers in the nation's 
classrooms, and an unprecedented number of teachers will retire 
over the next five years. Over the next decade, the nation will 
need to recruit 2 million new teachers into the public schools.
    Unfortunately, the shortage is compounded by the fact that 
more than one-third of children in grades 7-12 are taught by a 
teacher who lacks both a college major and certification in the 
subject being taught. Rates for ``out of field teaching''--
teachers teaching in fields in which they are not certified--
are especially high.
    The creation of a ``highly qualified teacher'' definition 
in the No Child Left Behind Act started the dialogue on 
defining the qualities of a good teacher as well as ways to 
ensure that individuals can meet this threshold. The Committee 
identifies this issue as a top priority and as such offers a 
step in the direction of paving the way for individuals 
interested in teaching, to ensure they become highly qualified 
and then going a step further, steering them to areas of most 
need.
    H.R. 2669 creates a new TEACH Grants program (modeled after 
the legislation introduced by Chairman Miller, H.R. 2204, the 
Teacher Excellence for All Children Act) that would provide up-
front pre-paid tuition assistance of $4,000 per year (with a 
maximum of $16,000) for high-achieving graduate and 
undergraduate students who commit to teaching a high-need 
subject in a high-need school for four years. Under this 
program, at least 21,500 undergraduate and graduate students 
are expected to receive these grants over the next five years.
    To further steer teacher candidates into high quality 
teacher education programs, the bill includes a bonus grant for 
students to receive up to an additional $2,000 to attend 
institutions with programs that integrate both content and 
teacher education training into their overall program. The 
bonus grants are modeled after programs such as those offered 
in the Cal State University system, and Cal Teach, a program at 
U.C. Berkeley, as well as the UTEACH program at the University 
of Texas. All these programs have demonstrated that high 
caliber students can be recruited into teaching programs with a 
specific content focus in areas of high need.
    The Committee strongly believes, while not the silver 
bullet solution to teacher quality, that TEACH Grants will help 
alleviate the challenges of ensuring a highly qualified teacher 
in every classroom. The issue of teacher quality will continue 
to be addressed in the reauthorization of the Higher Education 
Act when the Committee considers Title II, which covers pre-
service for teacher candidates. The Committee will also 
consider this issue during the reauthorization of the No Child 
Left Behind Act, which includes inservice support for teachers 
already in the classroom.

                ENCOURAGING AND REWARDING PUBLIC SERVICE

    As noted earlier, the Committee is concerned with the 
growing number of individuals who do not choose to enter into 
lower paying professions, such as public service, because of 
growing debt due to student loans. Building on the Income-Based 
proposal mentioned above, H.R. 2669 includes loan forgiveness 
for individuals serving the country in professions of national 
need. These targeted professions include: first responders, law 
enforcement officers, firefighters, nurses, public defenders, 
prosecutors, early childhood educators, librarians, and other 
public sector employees. The legislation specifically provides 
for $1,000 of loan forgiveness each year for five years--a 
maximum $5,000, which constitutes just about one-third of the 
average graduating debt--to those students in public service 
professions.
    To further encourage public service, the legislation 
includes revisions to the Direct Loan Income Contingent 
Repayment program. Individuals who choose public service will 
have the option to have their loans forgiven after 10 years if 
payments are made during that time period.
    The Committee believes that through increased Pell Grants, 
programs for better debt management and loan forgiveness, 
students are better able to assemble a package of debt relief 
to ensure a brighter future with less financial burdens. Debt 
burdens are particularly troublesome for public servants who 
often earn low salaries for their work. The policies embodied 
in H.R. 2669 recognize the contributions and challenges of 
public service, and the Committee hopes to encourage 
participation in these careers.

          CAPTURING EFFICIENCIES IN THE STUDENT LOAN PROGRAMS

    In the past few years, student lenders have greatly 
increased their efficiencies through market-driven mechanisms; 
however, the government operation and subsidization of the 
programs have not changed. This imbalance has resulted in 
greater profits for lenders rather than decreased costs for the 
taxpayers.
    The College Cost Reduction Act reduces approximately $19 
Billion over the next five years in excess subsidies paid by 
the federal government to lenders in order to return billions 
of dollars to students and families. This bill fully meets 
``pay-go'' rules, and returns $750 million to deficit 
reduction. Further, all savings are built on proposals passed 
by the U.S. House of Representatives through H.R. 5 and those 
outlined by the President in his fiscal year 2008 budget.
    Under the College Cost Reduction Act, the Committee 
believes lenders will still yield a profit, and all savings 
will be returned to students with reduced interest rates on 
loans, increased grant aid, and lower college costs. Further, 
the Congressional Budget Office (CBO) estimates of the College 
Cost Reduction Act assume continued robust participation in 
both the FFEL and the Direct Loan (DL) student loan programs.

Current ``borrower benefits'' fail to help all students

    Often lenders point to auxiliary benefits offered to 
students as a reward for particular repayment behavior. These 
``borrower benefits'' vary by lender and institution. The fine 
print is often overlooked and for benefits, such as reduced 
interest rates, students frequently must make a series of on-
time payments before they can reap these particular benefits.
    Even one of the largest lenders has acknowledged that only 
a small percentage of borrowers may ever realize repayment 
benefits. According to the student loan company, ``The bottom 
line is that less than 10 percent of borrowers will earn all 
the advertised Repayment Benefits as they will either 
consolidate their loans or miss a scheduled payment sometime 
during the first several years of repayment.''\10\
---------------------------------------------------------------------------
    \10\ http://www.salliemae.com/NR/rdonlyres/6030E40E-BE7A-4268-B253-
F417CFB63EB5/0/StraightTalkfromTimFitzpatrickvFINAL022007.pdf
---------------------------------------------------------------------------
    The College Cost Reduction Act ensures that ALL students 
can benefit from efficiencies achieved in the Federal student 
loan program.
    Further, legislative action has already limited a number of 
these benefits offered by lenders. For example, borrower 
origination fees are already scheduled to be reduced or 
eliminated for students by 2010--currently one of the most 
common benefits offered by lenders.

Students will continue to have lender choice

    There are over 3,000 lenders that participate in the FFEL 
program. If one participating lender leaves, another will take 
over. Additionally, the Higher Education Act ensures access for 
all students by mandating that the state-designated guaranty 
agency will provide a loan to any student who is unable to 
receive a loan from a lender (sec. 428j). The bottom line is 
that all students will continue to have access to low-cost 
federally-backed student loans to pay for college.

Protecting non-profit and ``small'' lenders

    Under current law, non-profit and small lenders are treated 
the same as for-profit lenders. Recognizing the unique mission 
of non-profit lenders, putting all their profits back into 
students, and the role of small lenders in communities across 
the country, H.R. 2669 provides for a fee reduction for these 
two categories of lenders. For FY 2008 alone, this translates 
into $85 million in benefits to small and non-profit lenders 
and nearly $500 million, or half a billion, over the next five 
years. The Committee believes these protections will further 
ensure borrower choice and an active marketplace.
    H.R. 2669 defines ``small'' lenders as those with 
portfolios that collectively comprise the lower 15% of total 
FFEL volume, which includes 99 percent of lenders participating 
in the program.

                               CONCLUSION

    H.R. 2669 represents a historic step forward in our efforts 
not only to help every qualified student go to college, but to 
persist through their college careers, and successfully 
graduate. No one should be denied the opportunity to go to 
college simply because of the price. The Committee believes the 
College Cost Reduction Act will pave the way to putting the 
American dream back within reach of every family in our 
country.

                     V. Section-by-Section Analysis


                   Title I--Investing in Student Aid


       PART A--INCREASING THE PURCHASING POWER OF THE PELL GRANT

Section 101. Mandatory Pell Grant increases

    The College Cost Reduction Act amends the Higher Education 
Act to include new mandatory funding for the Pell Grant. This 
is additional mandatory funding that is above the appropriated 
level.

                                         ADDITIONAL MANDATORY PELL FUNDS
----------------------------------------------------------------------------------------------------------------
                                                                                                       2012 &
                        2008-2009                           2009-2010     2010-2011     2011-2012      beyond
----------------------------------------------------------------------------------------------------------------
$200....................................................          $200          $300          $500          $500
----------------------------------------------------------------------------------------------------------------

    Coupled with an appropriated maximum, in 2008-2009, the 
maximum Pell Grant award will be $4,900. By 2011 the maximum 
Pell Grant will be at least $5,200.
    This section also includes language removing the tuition 
sensitivity provision which will allow low-income students at 
low cost institutions to fully benefit from the Pell Grant. 
This provision will go into effect immediately upon enactment 
of the College Cost Reduction Act.
    A year-round Pell Grant program is established in this 
section. This will allow students who attend more than two 
semesters (or quarters or the equivalent) in a calendar year, 
to continue to receive a Pell Grant.
    Eligibility criteria are amended to include legal permanent 
residents, part-time students, and students in certificate 
programs. Further the language in this section clarifies the 
definition of an academic year by giving institutions the 
flexibility to define academic year in order to accommodate 
institutional schedules.

Section 102. Support for working students

    This section includes provisions that will increase 
students' eligibility for the Pell grant through phased-in 
increases in the Income Protection Allowance for all students. 
The protected income for unmarried independent students without 
dependents will be $8,090 by 2012. For dependent students the 
protected income will be $6,000 by 2012.

Section 103. Simplified needs test and automatic zero improvements

    This section provides increases in the ``auto-zero'' from 
the current $20,000 to $30,000. This change will ensure that 
students in families with incomes below $30,000 will be 
eligible to receive the maximum Pell grant award.
    Further, this section amends the untaxed income and 
benefits in current law. Specifically, the legislation excludes 
TANF (welfare benefits), Earned Income Tax Credits, and Social 
Security from the income calculation in the needs analysis.
    Clarifications are also made to the asset calculation in 
this section of the bill to ensure that 529 plans are counted 
as the asset of the parent for independent students.

Section 104. Definitions

    This section outlines definitions for dislocated workers 
and means-tested federal benefits.

              PART B--MAKING STUDENT LOANS MORE AFFORDABLE

Section 111. Interest rate reductions

    The College Cost Reduction Act will cut interest rates in 
half for undergraduate students with subsidized student loans--
those in most financial need--over the next five years. The 
plan will begin by cutting interest rates to 6.12% on July 1, 
2008, and will continue to decrease rates until they reach 3.4% 
in 2012.

            CUTTING INTEREST RATES IN HALF: PHASE-IN SCHEDULE
------------------------------------------------------------------------
     2008           2009           2010           2011          2012
------------------------------------------------------------------------
      6.12           5.44           4.76           4.08          3.40
------------------------------------------------------------------------
Note.--All interest rate changes will take place on July 1 of that year

Section 112. Increasing loan limits and eliminating fees

    The College Cost Reduction Act will increase the borrowing 
limits for third and fourth year students to $7,500 and 
increase the aggregate borrowing limits (new levels in bold).

                                               STUDENT LOAN LIMITS
----------------------------------------------------------------------------------------------------------------
                                                                                           Total  (subsidized &
                                                                       Subsidized             unsubsidized)
----------------------------------------------------------------------------------------------------------------
                                                  ANNUAL LIMITS

DEPENDENT UNDERGRADUATES:
    First-Year Students.......................................                   $3,500                   $3,500
    Second-Year Students......................................                    4,500                    4,500
    Third-Year Students.......................................            (5,500) 7,500            (5,500) 7,500
    Fourth-Year+ Students.....................................            (5,500) 7,500            (5,500) 7,500
INDEPENDENT UNDERGRADUATES:
    First-Year Students.......................................                    3,500                    3,500
    Second-Year Students......................................                    4,500                    4,500
    Third-Year Students.......................................            (5,500) 7,500          (10,500) 12,500
    Fourth-Year+ Students.....................................            (5,500) 7,500          (10,500) 12,500
GRADUATE STUDENTS.............................................                    8,500                   20,500
                                                AGGREGATE LIMITS

DEPENDENT UNDERGRADUATES......................................          (23,000) 30,500          (23,000) 30,500
INDEPENDENT UNDERGRADUATES....................................          (23,000) 30,500          (46,000) 53,500
GRADUATE STUDENTS.............................................          (65,500) 73,000        (138,500) 156,000
----------------------------------------------------------------------------------------------------------------

Section 113. Reduction of Special Allowance Payments

    This section decreases the lender Special Allowance 
Payments (SAP) rate by 0.55 percentage points (or 55 basis 
points) and equalizes the SAP rate for Stafford and PLUS loans.

Section 114. Elimination of exceptional performer status for lenders

    This section eliminates the ``exceptional performance'' 
designation the Secretary of Education may give to lenders, 
loan servicers, and guaranty agencies if they are in full 
compliance with due diligence requirements. There are currently 
18 ``Exceptional Performers,'' including four of the five 
largest lenders.

Section 115. Reduction of lender insurance percentage

    Currently, lenders have an insurance rate of 97% which 
insures private lenders from defaulted loans. In the case of 
default, the government will pay the private lender this 
percentage of the owed funds. This section reduces this 
percentage to 95%.

Section 116. Guaranty agency collection retention

    Currently, guaranty agencies are allowed to retain 23% of 
the funds they collect from defaulted loans, in part to cover 
the cost of collection. This section reduces the collection 
rate to 16%, which is consistent with the fee paid to those who 
serve as collection contractors for the Direct Loan program.

Section 117. Unit costs for account maintenance fees

    Currently guarantors are paid a fee for administrative 
costs based on the original principal amount of active loans 
they have guaranteed. This section shifts this fee so that it 
is tied to the number of accounts lenders have, which more 
accurately reflects the guarantors' cost.

Section 118. Increased loan fees from lenders

    Lenders are currently charged a fee of 0.5% on all new 
loans to partially offset the federal cost of administering the 
FFEL program. This section increases this origination fee to 1% 
for for-profit lenders. The fee is eliminated for non-profit 
lenders and small lenders, defined as those in the lower 15% of 
volume.

Section 119. Student loan information

    This section requires lenders and guaranty agencies to 
provide student loan information to institutions of higher 
education and third-party servicers for the purposes of 
preventing student loan defaults.

Section 120. Market-based determination of lender returns

    This section requires a study by the Secretaries of 
Education and Treasury with the Congressional Budget Office, 
the Office of Management and Budget, and the General Accounting 
Office to identify and select among the best mechanisms for a 
loan auction. Based on the information from the study, a pilot 
program shall be implemented by the Secretary of Education 
using 10% of loan volume under Part B and 20% the second year 
of the pilot study.

                 PART C--REWARDING SERVICE IN REPAYMENT

Section 131. Loan forgiveness for service in areas of national need

    The College Cost Reduction Act provides $5,000 in loan 
forgiveness for those serving the country in critical areas, 
including first responders, law enforcement officers, 
firefighters, nurses, public defenders, prosecutors, early 
childhood educators, and librarians. This section makes $1,000 
available for each year up to $5000.

Section 132. Income-Contingent Repayment for public service employees

    This section amends the current Income-Contingent Repayment 
program in the Direct Loan program and provides complete loan 
forgiveness for public sector employees after 10 years of 
service.

Section 133. Income-based repayment

    The College Cost Reduction Act builds on the tenants of the 
Income Contingent Repayment program (currently not an option in 
the FFEL program) by guaranteeing that borrowers will not pay 
more than 15% of their adjusted gross income in student loan 
repayments. Under this section, unpaid interest and principal 
are capitalized.

Section 134. Definition of economic hardship

    This section redefines the eligibility for economic 
hardship to 150% of the poverty line applicable to the 
borrower's family size.

Section 135. Deferrals

    This section amends the appropriate parts of the law to 
eliminate the 3 year time restriction for deferrals.

Section 136. Maximum repayment period

    This section amends the maximum repayment period in the 
income-contingent repayment program.

Section 137. Deferral of loan repayment following active duty

    This section allows veterans who were enrolled in or left 
college within six months of deployment, to receive extended 
repayment on loan terms of up to 13 months upon return from 
active duty.

Section 138. Sense of the Congress

    This section declares the Sense of Congress that the 
Secretary of Education and Treasury work together with the 
Government Accountability Office to develop a process to pay 
for loans using income tax withholdings.

              PART D--SUSTAINING THE PERKINS LOAN PROGRAM

Section 141. Federal Perkins Loans

    This section provides $500 million for the Perkins Loan 
Federal Contribution program for fiscal years 2008-2012.

                 Title II--Reducing the Cost of College


Section 201. State commitment to affordable college education

    This bill mandates that states maintain their own level of 
college financing--to ensure that they fulfill their end of the 
bargain to make a quality college education affordable to all 
students and constrain tuition hikes. Under this section, 
states risk losing their LEAP funds (Leveraging Educational 
Assistance Partnership), if they fail to meet this state 
maintenance of effort.
    This section also provides a waiver for states that may 
have specified challenges in maintaining support for higher 
education.

Section 202. Consumer information and public accountability in higher 
        education

    The College Cost Reduction Act will redesign the existing 
U.S. Department of Education College Opportunity Online Locator 
(COOL) website (http://nces.ed.gov/ipeds/cool), making it 
easier for parents and students to use, while not imposing 
burdensome reporting requirements on colleges and universities.
    Included on the COOL website will be user-friendly College 
Consumer Profiles that will give parents and students access to 
more information about colleges and universities than ever 
before. The information will include:
          
 ``Sticker price'' for a school over a three 
        year time period;
          
  ``Net tuition price'' (average costs minus 
        average grants) over that same time period;
          
 Percentage change in both over that same 
        time period; and
          
 Percentage change in the Higher Education 
        Price Index (HEPI) over that same time period.
    Any school that raises its tuition at twice the rate of the 
HEPI will be required to provide students and parents a 
description of the factors necessitating the increase.

Section 203. Incentives and rewards for low tuition

    This bill, through ``Incentives and Rewards for Low 
Tuition,'' will allow for additional mandatory need-based grant 
aid to schools that keep their annual net tuition increases at 
a rate equal to, or below, the increase in the Higher Education 
Price Index (HEPI) for that academic year and to institutions 
that guarantee their tuition.

Section 204. Cooperative education

    This section creates Cooperative Education Rewards for 
institutions or consortia of institutions that provide students 
with both academic and work experiences to prepare them for 
their careers and that help students support themselves 
financially while in school. Grant funds will be used to 
increase the quality and availability of such programs and to 
provide outreach to underserved populations.

   Title III--Ensuring a Highly Qualified Teacher in Every Classroom


                          PART A--TEACH GRANTS

Section 301. TEACH grants

    This section creates new TEACH Grants that provide up-front 
pre-paid tuition assistance of $4,000/year (with a maximum of 
$16,000) for high-achieving graduate and undergraduate students 
who commit to teaching a high-need subject in a high-need 
school for four years. Bonus grants are provided to students 
who are enrolled in a qualified teacher education program.

                     PART B--CENTERS OF EXCELLENCE

Section 311. Centers of Excellence

    This section establishes the Centers of Excellence which 
will provide funds to minority serving institutions to help 
recruit and prepare teachers and to increase opportunities for 
Americans of all educational, ethnic, class, and geographic 
backgrounds to become highly qualified teachers. Funds will be 
used to strengthen teacher preparation programs by implementing 
reforms, using advanced technology, and retraining faculty. 
Further, the Centers of Excellence will provide programs with 
sustained and high-quality clinical experience that prepare 
teachers to close student achievement gaps.

         Title IV--Leveraging Funds To Increase College Access


PART A--STRENGTHENING HISTORICALLY BLACK COLLEGES AND UNIVERSITIES AND 
                     MINORITY SERVING INSTITUTIONS

Section 401. Investment in Historically Black Colleges and Universities 
        and other minority serving institutions

    The College Cost Reduction Act provides a total $500 
million over the next five years to the following designated 
institutions with the following amounts:
    
 $200 million to Hispanic-Serving Institutions to 
be distributed to the institutions in the same competitive 
manner as is done under Title V of the Higher Education Act, 
and for uses under Title V with priority to those applications 
that will increase the number of low-income students attaining 
degrees in the fields of science, technology, and math and to 
applications that develop model transfer articulation 
agreements.
    
 $170 million to Historically Black Colleges and 
Universities to be distributed for use through some of the 
activities described in section 323(a) of the Higher Education 
Act including the purchase of laboratory equipment, the funding 
of instruction, the purchase of materials, and the 
establishment or enhancement of a teacher education program. 
Additionally, funds may be used in a manner consistent with the 
institution's comprehensive plan and designed to increase the 
institution's capacity to prepare students for careers in the 
physical and natural sciences, math, computer science, 
information technology, engineering, language instruction and 
other specified areas.
    
 $30 million to Predominately Black Institutions to 
award 10 grants of $600,000 annually for programs in the fields 
of science, technology, engineering, health education, teacher 
education, or programs that improve the educational outcomes of 
African American males.
    
 $60 million to Tribal Colleges and Universities to 
be distributed in the manner that the funds are used under 
current law in section 316 of the Higher Education Act 
including the purchase of laboratory equipment, the funding of 
instruction, the purchase of materials, or the establishment or 
enhancement of teacher education and outreach programs.
    
 $30 million to Alaska/Hawaiian Native Institutions 
to be distributed in the manner that the funds are used under 
current law in section 317 of the Higher Education Act 
including the purchase of laboratory equipment, the funding of 
instruction, the purchase of materials, and the creation of 
academic tutoring programs.
    
 $10 million to Asian American and Pacific Islander 
Institutions to be distributed to institutions as defined in 
this section, and used in a manner that may include the 
purchase of laboratory equipment, the funding of instruction, 
the purchase of materials, and the creation of tutoring 
programs.
    This section defines the following for the purposes of 
distributing funds:
    Predominately Black Institutions as institutions that have 
an enrollment of financially needy undergraduate students; an 
enrollment of undergraduate students at least 40% of whom are 
Black; and, that has at least 1,000 undergraduate students of 
whom not less than 50% enrolled at the institution are low-
income or first generation and registered in a BA or AA program 
leading to a degree.
    Asian and Pacific Islander-serving institution as 
institutions that have an enrollment of undergraduate students 
that is at least 10% Asian American and Pacific Islander and 
has a significant enrollment of financially needy students.

                PART B--COLLEGE ACCESS CHALLENGE GRANTS

Section 411. College Access Challenge Grants

    This section establishes the ``College Access Challenge 
Grants,'' which leverages federal funds to increase the number 
of students from underserved populations who enter and complete 
college through matching grants to philanthropic organizations. 
The federal government will provide a 2 to 1 match for private 
and other public funds for these purposes.
    The philanthropic organizations will work with states, 
institutions of higher education, and local education agencies 
and other organizations to raise funds and provide outreach and 
student support programs.

                          PART C--UPWARD BOUND

Section 412. Upward Bound

    The College Cost Reduction Act restricts the Secretary's 
use of funds for the purposes of evaluating and selecting 
participants of the Upward Bound program.
    This section provides an additional $120 million to restore 
Upward Bound funding to unfunded programs from the FY07 
competition.

                     Title V--Additional Provisions


Section 501. Independent evaluation of distance education programs

    This section calls for a study by the National Academy of 
Sciences to evaluate the quality of distance education programs 
as compared to campus-based education programs at institutions 
of higher education.

Section 502. Encouraging colleges and universities to ``go green''

    This section declares the Sense of the Committee on 
Education and Labor that there should be increased awareness of 
the need to use sustainable economic and environmental 
practices on colleges and universities.

                     VI. Explanation of Amendments

    The Amendment in the Nature of a Substitute, as amended, is 
explained in the body of this report.

           VII. Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act, requires a description of the application 
of this bill to the legislative branch. H.R. 2669 amends does 
not prevent legislative branch employees' coverage under this 
legislation.

                    VIII. Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. H.R. 2669 contains no intergovernmental or private-
sector mandates as defined by the Unfunded Mandates Reform Act 
(UMRA).

                         IX. Earmark Statement

    H.R. 2669 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clauses 9(d), 9(e) or 9(f) of rule XXI of the House of 
Representatives.
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    XI. Statement of Oversight Findings and Recommendations of the 
                               Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee advises that the bill was a result of the 
Committee's budget reconciliation instructions.

            XII. New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 2669 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 25, 2007.
Hon. George Miller,
Chairman, Committee on Education and Labor,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2669, the College 
Cost Reduction Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Deborah 
Kalcevic and Justin Humphrey.
            Sincerely,
                                           Peter R. Orszag,
                                                          Director.
    Enclosure.

H.R. 2669--College Cost Reduction Act of 2007

    Summary: H.R. 2669 would amend the Higher Education Act of 
1965 and make a number of changes to the federal financial 
assistance programs related to postsecondary education. The 
bill would reduce costs for some borrowers, reduce the 
government's payments to lenders and guaranty agencies, modify 
fees for lenders, and create new grant programs for 
postsecondary students and institutions. CBO estimates that net 
effects of those changes would reduce direct spending by $1.7 
billion over the 2008-2012 period and by $0.9 billion over the 
2008-2017 period.
    Implementing the bill also would affect discretionary 
spending, primarily by increasing Pell grants. Assuming the 
appropriation of the necessary funds, those discretionary costs 
would total about $158 billion over the 2008-2012 period.
    H.R. 2669 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated Costs to the Federal Government: The estimated 
budgetary impact of H.R. 2669 is summarized in Table 1. The 
budgetary effects of this legislation fall within budget 
function 500 (education, training, employment, and social 
services).

                                                                        TABLE 1.--ESTIMATED BUDGETARY IMPACT OF H.R. 2669
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 By fiscal year, in millions of dollars--
                                         -------------------------------------------------------------------------------------------------------------------------------------------------------
                                             2008        2009        2010        2011        2012        2013        2014        2015        2016        2017        2008-2012       2008-2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING

              STUDENT LOANS

Provisions Affecting Borrowers:
    Estimated Budget Authority..........       1,075       1,588       2,350       3,125       3,850       2,265       1,000       1,050       1,090       1,105          11,988          18,498
    Estimated Outlays...................         795       1,136       1,855       2,545       3,195       2,890         905         950         990       1,010           9,526          16,271
Provisions Affecting Lenders:
    Estimated Budget Authority..........      -5,405      -3,165      -3,340      -3,500      -3,665      -3,830      -3,995      -4,160      -4,340      -4,530         -19,075         -39,930
    Estimated Outlays...................      -4,105      -2,650      -2,815      -2,945      -3,085      -3,220      -3,360      -3,500      -3,655      -3,810         -15,600         -33,145
Provisions Affecting Guaranty Agencies:
    Estimated Budget Authority..........      -2,470        -155        -165        -170        -180        -185        -190        -200        -210        -215          -3,140          -4,140
    Estimated Outlays...................      -2,405        -135        -140        -145        -155        -160        -165        -170        -175        -180          -2,980          -3,830
Net Programmatic Interactions for
 Student Loan Changes:
    Estimated Budget Authority..........         -65        -103         -65         -30           *        -100        -175        -190        -190        -195            -263          -1,113
    Estimated Outlays...................         -35         -91         -55         -40           *         -55        -135        -160        -160        -165            -221            -896             GRANT PROGRAMS

Increases in Grant Aid to Students:
    Budget Authority....................         915         975       1,455       2,400       2,470       2,505       2,560       2,620       2,660       2,685           8,215          21,245
    Estimated Outlays...................         305         910       1,042       1,646       2,393       2,467       2,516       2,568       2,628       2,664           6,297          19,141
Increases in Grants to Institutions of
 Higher Education:
    Budget Authority....................         595         245         245         245         215           0           0           0           0           0           1,545           1,545
    Estimated Outlays...................          78         388         289         300         255         195          33           9           0           0           1,309           1,545
TOTAL CHANGES IN DIRECT SPENDING:
    Estimated Budget Authority..........      -5,355        -615         480       2,070       2,690         655        -800        -880        -990      -1,150            -730          -3,895
    Estimated Outlays...................      -5,368        -442         176       1,361       2,603       2,117        -206        -303        -372        -481          -1,670            -914

                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATIONPell Grant Program: \1\
    Estimated Authorization Level.......      28,311      34,167      39,386      44,784      50,780      51,989      53,300           0           0           0         197,428         302,716
    Estimated Outlays...................       6,795      29,150      35,302      40,577      46,115      50,950      52,279      40,482       1,066           0         157,939         302,716
               MEMORANDUM

Student Loan Spending Under the CBO
 Baseline:
    Estimated Budget Authority..........       4,575       5,248       5,825       6,011       5,800       5,738       5,681       5,586       5,480       5,389          26,859          54,733
    Estimated Outlays...................       3,241       3,889       4,506       4,839       4,734       4,764       4,769       4,752       4,712       4,638          21,209         44,844
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Assumes the maximum award for academic years 2013-2014 and 2014-2015 is the same level ($11,600) as that specified for academic year 2012-2013.
Note.--* = Less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
2669 will be enacted early in fiscal year 2008.
    As required under the Federal Credit Reform Act of 1990, 
the costs of student loans are estimated on a net-present-value 
basis rather than the cash basis used for most other federal 
programs. H.R. 2669 would affect such credit estimates in 
several ways: by reducing interest rates charged on student 
loans, by reducing certain payments to private lenders of 
federally guaranteed loans, by decreasing payments to guaranty 
agencies, and by increasing certain fees paid to the government 
by such lenders.
    In fiscal year 2006, the student aid programs provided an 
estimated $16 billion in federal grant aid to over 5 million 
students and an estimated $61 billion in federal loan aid or 
guarantees to 8 million students and parents. The current grant 
aid is mostly discretionary spending (i.e., from annual 
appropriation action); the loan aid is virtually all direct 
spending.
    H.R. 2669 would expand loan aid to student borrowers while 
reducing the federal cost of providing that aid, establish new 
mandatory grant aid to students, and establish several other 
mandatory grant programs to institutions of higher education. 
The bill also would authorize a major increase in discretionary 
funding for the Pell Grant Program.

Direct spending--student loans

    Provisions Affecting Borrowers. H.R. 2669 would make 
several changes affecting student loan borrowers. The bill 
would reduce interest rates and increase the borrowing limits 
for some borrowers, expand borrower repayment options, provide 
loan forgiveness for borrowers working in specified public-
sector jobs, and expand eligibility by altering the 
determination of financial need. Combined, these changes are 
estimated to increase costs by $795 million in 2008, by $9.5 
billion over the 2008-2012 period, and by $16.3 billion over 
the 2008-2017 period.
    Reductions in Interest Rates. Under current law, the 
interest rate charged borrowers for both subsidized and 
unsubsidized student loans is 6.8 percent for new loans 
disbursed after June 30, 2006. H.R. 2669 would reduce the rate 
for new subsidized loans in stages: for successive 12-month 
periods beginning in July 2008, the rates would be 6.12 
percent, 5.44 percent, 4.76 percent, 4.08 percent, and 3.4 
percent, respectively. Between $30 billion and $34 billion in 
new loans would be affected each year. Beginning in July 2013, 
for new loans, the rate would revert back to the 6.8 percent 
rate prescribed in current law.
    For guaranteed student loans, private lenders are paid 
interest based on a formula; if that rate exceeds what the 
borrower pays, the federal government is responsible for paying 
the difference between the two rates. When the lender formula 
produces a lower rate than the borrower pays, the lender must 
return the difference to the government. Consequently, any 
reduction in the borrower's interest rate increases federal 
costs by either increasing the payments made to lenders or 
reducing the rebate lenders pay to the government. In the 
direct student loan program, the interest rate reductions 
reduce federal collections. In both cases--either through an 
increase in federal payments for loan guarantees or a decrease 
in federal collections for direct loans--the net cost of 
providing the student loan assistance rises and is measured as 
an increase in the subsidy cost, recorded on a present-value 
basis at the time of loan disbursement. CBO estimates that, as 
a result, loan subsidy costs would rise by $6.2 billion over 
the 2008-2012 period and $8.2 billion over the 2008-2017 period 
(see Table 2).
    Increases in Loan Limits. H.R. 2669 would increase the 
annual loan limits for third- and fourth-year undergraduate 
students, and adjust the lifetime loan limits to accommodate 
those increases. Under current law, the maximum loan a third- 
or fourth-year dependent student can borrow is $5,500, and the 
lifetime limits are $23,000 for undergraduates and $65,500 for 
combined undergraduate and graduate school borrowing. For 
third- and fourth-year independent students, the maximum annual 
limit is $10,500 and lifetime limits are $46,000 for 
undergraduates and $138,500 for combined undergraduates and 
graduate borrowers.
    Beginning in 2008, the legislation would increase the 
third- and fourth-year limit to $7,500 and the respective 
lifetime limits to $30,500 and $73,000 for dependent students. 
The third- and fourth-year limit would rise for independent 
students to $12,500, and the respective lifetime limits would 
rise to $53,500 and $156,000. Overall, the increases in the 
loan limits would raise loan volume between $1 billion and $3 
billion each year and would increase subsidy costs by $1.4 
billion over the 2008-2012 period and $3.5 billion over the 
2008-2017 period, CBO estimates.
    Income-based Repayment and Economic Deferment. Beginning in 
October 2007 for all student loan borrowers, the current 
maximum three-year period for which a borrower could receive an 
economic hardship deferment would be eliminated. (A deferment 
is a repayment status during which a borrower does not have to 
make any payment on their student loan.) In addition, the 
eligibility criteria for an economic hardship deferment would 
be altered. Currently, borrowers are eligible for an economic 
hardship deferment if their income is below 100 percent of 
poverty for a family of two or their income is below 220 
percent of poverty for a family of two and their debt payments 
exceed 20 percent of their income. H.R. 2669 would set the 
eligibility at 150 percent of poverty based on family size.

                                                                  TABLE 2.--DIRECT SPENDING OUTLAY EFFECTS OF MAJOR PROVISIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     By fiscal year, in millions of dollars--
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
                                                     2008        2009        2010        2011        2012        2013        2014        2015        2016        2017      2008-2012   2008-2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          STUDENT LOANS

Provisions Affecting Borrowers:
    Interest Rate Reductions--Estimated Outlays.         205         665       1,205       1,780       2,370       2,020           0           0           0           0       6,225       8,245
    Loan Limit Increases--Estimated Outlays.....          80         250         345         370         380         390         400         410         415         425       1,425       3,465
    Income-Based Repayment--Estimated Outlays...         455         130         130         135         140         150         155         160         165         170         990       1,790
    Loan Forgiveness--Estimated Outlays.........          50          85         165         245         290         315         335         365         390         395         835       2,635
    Needs Analysis--Estimated Outlays...........           5           6          10          15          15          15          15          15          20          20          51         136
        Subtotal, Provisions Affecting                   795       1,136       1,855       2,545       3,195       2,890         905         950         990       1,010       9,526      16,271
         Borrowers--Estimated Outlays...........
Provisions Affecting Lenders:
    Special Allowance Payment--Estimated Outlays      -3,110      -2,255      -2,385      -2,500      -2,620      -2,735      -2,855      -2,975      -3,105      -3,240     -12,870     -27,780
    Lender Insurance--Estimated Outlays.........        -765        -235        -255        -265        -275        -285        -295        -310        -325        -335      -1,795      -3,345
    Lender Fees--Estimated Outlays..............        -230        -160        -175        -180        -190        -200        -210        -215        -225        -235        -935      -2,020
        Subtotal, Provisions--Affecting Lenders--     -4,105      -2,650      -2,815      -2,945      -3,085      -3,220      -3,360      -3,500      -3,655      -3,810     -15,600     -33,145
         Estimated Outlays......................
Provisions Affecting Guaranty Agencies:
    Retention of Guaranty Agency Collections--        -1,365        -135        -140        -145        -155        -160        -165        -170        -175        -180      -1,940      -2,790
     Estimated Outlays..........................
    Guaranty Agency Fee--Estimated Outlays......      -1,040           *           *           *           *           *           *           *           *           *      -1,040      -1,040
        Subtotal, Provisions--Affecting Guaranty      -2,405        -135        -140        -145        -155        -160        -165        -170        -175        -180      -2,980      -3,830
         Agencies--Estimated Outlays............
Net Programmatic Interactions for Student Loan           -35         -91         -55         -40           *         -55        -135        -160        -160        -165        -221        -896
 Changes--Estimated Outlays.....................
                                                                                         GRANT PROGRAMS

Provisions Affecting Grant Aid to Students:
    Mandatory Pell Grants--Estimated Outlays....         202         830         982       1,556       2,278       2,361       2,411       2,463       2,518       2,554       5,848      18,156
    Other Grants--Estimated Outlays.............         104          80          60          90         115         107         105         105         110         110         449         985
        Subtotal, Provisions--Affecting Grant            305         910       1,042       1,646       2,393       2,467       2,516       2,568       2,628       2,664       6,297      19,141
         Aid to Students--Estimated Outlays.....
Grant Aid to Institutions--Estimated Outlays....          78         388         289         300         255         195          33           9           0           0       1,309       1,546

                                                                                TOTAL CHANGES IN DIRECT SPENDINGEstimated Outlays...............................      -5,368        -442         176       1,361       2,603       2,117        -206        -303        -372        -481      -1,670       -914
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes.--* = Costs or savings of less than $500,000. Components may not sum to totals because of rounding.

    In addition, beginning in October 2007, the bill would 
establish a new income-based repayment plan available to all 
student loan borrowers similar to the current income-contingent 
repayment (ICR) plan in the direct student loan program. If 
borrowers' total federal student loan payments would exceed 15 
percent of their calculated income, which is their adjusted 
gross income less an amount which is 150 percent of poverty for 
their family size, borrowers could elect to have their payments 
limited to 15 percent of their calculated income. If their 
payments are less than the amount due, payments would first be 
credited to interest, and then to principal. Any unpaid 
interest due on the loans would be capitalized. If, or when, 
borrowers are able to make 100 percent of their principal and 
interest payments, borrowers would return to a 10-year 
repayment, with some qualifications. At the end of 20 years, 
any unpaid principal, including any unpaid capitalized 
interest, would be paid by the government in case of a 
guaranteed loan and would be forgiven in the case of a direct 
loan.
    Using the CBO's Long-Term (CBOLT) model, we estimated the 
eligible population based on the projected earnings for workers 
with some post-secondary schooling. CBO expects that 
participation in this program would be relatively low because 
of the required capitalization of interest and the seeming 
reluctance of borrowers to apply for similar relief elsewhere 
(for example, the low participation in the current ICR plan).
    CBO estimates that extending the economic deferment 
combined with the new income-based repayment plan would 
increase federal costs by $1.0 billion over the 2008-2012 
period and $1.8 billion over the 2008-2017 period.
    Loan Forgiveness for Certain Public-Sector Jobs. The bill 
would create two new loan forgiveness programs for public-
sector borrowers. The first, loan forgiveness for service in 
areas of national need, would forgive loans to new borrowers as 
of October 1, 2007, who are employed in certain public-sector 
jobs, including law enforcement, public safety, emergency 
management, public health, early childhood and bilingual 
education, nursing, social work and child welfare, public 
interest legal services, speech pathology, and library science.
    For each year of full-time employment, a borrower would 
have up to $1,000 of his or her loans forgiven, up to a 
lifetime maximum of $5,000. Based on data from the Bureau of 
Labor Statistics and the Department of Education, CBO estimates 
that this provision would cost $2.7 billion over 10 years and 
that approximately 115,000 borrowers each year would be 
eligible for some amount of forgiveness in the initial years, 
with the total growing over 10 years.
    The second program, income-contingent repayment for public-
sector employees, would provide forgiveness to borrowers who 
agree to repay their loans through the income-contingent 
repayment plan under the direct loan program beginning in 
October 2007. To be eligible, a borrower would have to be 
employed in a public-sector job for 10 years and make 120 
payments on the loan. Eligible public-sector jobs include 
government, emergency management, public safety, law 
enforcement, public health, early childhood education, social 
work in a public child or family service agency, and public 
interest legal services. Once borrowers met these criteria, 
they would have their remaining outstanding loan balance 
forgiven.
    Based on data from the Census Bureau, the Survey of Income 
and Program Participation, the Bureau of Labor Statistics, and 
the Department of Education, CBO estimates that approximately 
50,000 new borrowers each year would eventually be eligible 
for, and participate in, income-contingent loan forgiveness 
each year. The cost of the loan forgiveness would be covered by 
savings from borrowers switching from the guaranteed loan 
program to the income-contingent repayment plan in the direct 
program. As a result, CBO estimates the program would save $70 
million between 2008 and 2017.
    Changes in Calculation of Needs Analysis. The bill would 
change the way eligibility is calculated for Pell grants and 
subsidized student loans; the latter is classified as mandatory 
spending (see the section on ``Spending Subject to 
Appropriation'' for the discretionary impact on Pell grants). 
Those changes include:
          
 Raising the level at which a student 
        automatically qualifies to have no expected family 
        contribution;
          
 Changing the definition of untaxed income 
        and the treatment of education savings accounts;
          
 Expanding the discretion of financial aid 
        officers;
          
 Increasing income protection allowances for 
        dependent and independent students; and
          
 Changing eligibility for the simplified 
        needs test.
    Using data on applicants for federal financial assistance, 
CBO estimates that those provisions in total would add costs of 
$51 million over the 2008-2012 period and $136 million over the 
2008-2017 period to the student loan program.
    Provisions Affecting Lenders. H.R. 2669 would alter 
payments to lenders in the guaranteed student loan program. The 
quarterly payments to lenders on all new loans would be 
reduced, federal insurance against default would be lowered, 
and lenders' origination fees would be increased. Combined, 
these changes would reduce costs by an estimated $4.1 billion 
in 2008, $15.6 billion over the 2008-2012 period, and $33.1 
billion over the 2008-2017 period,
    Reduction of Special Allowance Payments to Lenders. Under 
current law, private lenders receive quarterly payments from 
the government when the interest rate formula used to pay 
lenders would provide an interest rate higher than that which 
would apply to borrowers. Such payments are referred to as 
special allowance payments. The specific lender formulas are 
based on the 91-day commercial paper rate plus:
          
 1.74 percent for loans when borrowers are in 
        school, in the six-month grace period after leaving 
        school, or in a deferment period (for example, for 
        economic hardship);
          
 2.34 percent when the borrower is repaying 
        the loan; and
          
 2.64 percent when the borrower has 
        consolidated the loan or the borrower is a parent 
        (including graduate students participating in the 
        parent program: GradPLUS).
    Beginning in October 2007, H.R. 2669 would lower those 
``add-ons'' by 55 basis points (or 0.55 percentage points--
roughly one-half of one percent) for new student and new 
consolidation loans and by 85 basis points for new parent and 
new GradPLUS loans.
    CBO projects new loan volume in the guaranteed loan program 
will rise from nearly $58 billion in 2008 to $86 billion by 
2017, and that loan volume for new consolidations will range 
from about $21 billion to $28 billion a year over the same 
period. CBO estimates that the reduced special allowance 
payments would reduce federal spending by $12.9 billion over 
the 2008-2012 period and $27.8 billion over the 2008-2017 
period.
    Reductions in Percentage Guaranteed. The bill would reduce 
the percentages that lenders receive when borrowers default on 
their loans in two ways: lowering the insurance rate from 97 
percent of unpaid principal to 95 percent and eliminating the 
differential treatment (99 percent insurance) accorded to 
lenders defined as exceptional performers. Consequently, all 
lenders would receive the same insurance rate (95 percent) on 
loans originating after September 2007. CBO estimates that 
those changes together would reduce outlays by $1.8 billion 
over the 2008-2012 period and by $3.3 billion over the 2008-
2017 period.
    The reduction in the percentage guaranteed rate from 97 
percent to 95 percent would apply for loans whose first 
disbursement is after September 2007, including new 
consolidation loans. CBO estimates the two-point reduction in 
the insured percentage by itself would save about $0.2 billion 
over the 2008-2017 period.
    Under current law, exceptional performers--lenders who 
exceed standards for various administrative activities--are 
insured at 99 percent rather than 97 percent. Based on recent 
information from the Department of Education, CBO estimates 
that, in any given year, about 90 percent of outstanding 
principal is held by lenders with that designation. H.R. 2669 
would reduce the insurance rate for those lenders from 99 
percent to 95 percent on loans whose first disbursement is on 
or after October 2007. CBO estimates that the reduction for 
those lenders would save about $3.2 billion over the 2008-2017 
period.
    Increased Loan Fees From Lenders. Under current law, 
lenders pay the federal government 0.5 percent on each new loan 
(including consolidations). Beginning in October 2007, H.R. 
2669 would eliminate this fee on new loans for relatively small 
lenders and all nonprofit lenders, but increase the fee on new 
loans made by other lenders to 1.0 percent. CBO estimates that 
for about 70 percent of loans, the fee would increase by 0.5 
percentage points; the remainder would see the fee eliminated. 
Based on its projections of loans to be disbursed over the 
projection period, CBO estimates that the modified fee would 
lower federal costs by $2.0 billion over the 2008-2017 period.
    Loan Auction. H.R. 2669 would authorize a series of 
activities that could introduce an auction process for student 
loans. Those activities would begin with a planning study of 
alternative market-based mechanisms for setting lenders' 
yields, followed by a pilot program that would test the 
recommended approach. That is, the government could auction the 
right to make federally guaranteed loans with the ``winners'' 
of such auction determined by bidding for the lowest acceptable 
payments by the government to such prospective lenders. Upon 
completion of an evaluation by the Government Accountability 
Office, the Secretary of Education could implement the approach 
for the entire student loan program. Because of the substantial 
uncertainties about the specific approach that would be adopted 
as well as the significant discretion allowed the Secretary of 
Education, CBO does not have a sufficient basis upon which to 
estimate the budgetary effects of this provision.
    Provisions Affecting Guaranty Agencies. H.R. 2669 would 
lower payments to guaranty agencies that administer the 
guaranteed student loan program on behalf of the government. 
The share of default collections retained by the guaranty 
agencies would be lowered and the method of federal payment to 
manage the overall portfolio would be changed. Combined, those 
changes would reduce costs by an estimated $2.4 billion in 
2008, $3.0 billion over the 2008-2012 period, and $3.8 billion 
over the 2008-2017 period.
    Retention of Guaranty Agency Collections. Under current 
law, nonfederal guaranty agencies are allowed to retain 23 
percent of their collections on defaulted loans. H.R. 2669 
would reduce that percentage to 16 percent beginning in fiscal 
year 2008. CBO estimates that reducing the retention rates 
would save $1.9 billion over the 2008-2012 period and $2.8 
billion over the 2008-2017 period.
    Account Maintenance Fee. Guaranty agencies currently 
receive federal payments of up to 0.1 percent of the original 
principal of their outstanding insured loans to support their 
administrative costs. Starting in October 2007, H.R. 2669 would 
change the percentage fee to a fixed dollar payment per loan. 
Based on information provided by the Department of Education, 
CBO expects that the fee would be set at about $7.50 per loan 
in 2008. CBO estimates that the change, on average, would 
reduce payments tied to outstanding loans, but would have no 
significant net budgetary impact with respect to future loans. 
The savings with respect to outstanding loans reflect the surge 
in consolidations in the past several years and for which are 
much larger than the average loan and for which the current 0.1 
percent fee exceeds the fixed $7.50 amount. Reduced costs for 
outstanding loans would total $1.0 billion.
    Programmatic Interactions for Student Loans. There are 
interactions among the numerous loan-related provisions 
included in H.R. 2669. For example, increasing loan volume by 
raising the borrowing limits would affect the overall savings 
from decreasing lenders' yields and the percentages of loans 
guaranteed. The combined effect of all the interactions is to 
lower costs by $221 million over the 2008-2012 period and by 
$896 million over the 2008-2017 period.

Direct spending--grant programs

    Increases in Grant Aid to Students. H.R. 2669 also would 
create new grant programs, increase funding for the existing 
Pell Grant Program, and expand eligibility for the Academic 
Competitiveness and SMART grant programs. Combined, those 
changes would increase costs by $305 million in 2008, by $6.3 
billion over the 2008-2017 period, and by $19.1 billion over 
the 2008-2017 period, CBO estimates.
    Mandatory Pell Grant Add-on. The bill would appropriate 
$19.3 billion over the next 10 years to create a direct 
spending add-on to the existing discretionary Pell Grant 
program. The mandatory funds in H.R. 2669 would be added to the 
funds provided in the annual appropriation act to raise the 
maximum award level above that set in such appropriation acts 
(currently $4,310 for academic year 2007-2008).
    CBO estimates that, along with the costs of other 
provisions in the bill that affect Pell grants, the additional 
funds provided would allow the maximum grant to be increased by 
approximately $200 for academic year 2008-2009 and by 
additional amounts each year until the increase reached 
approximately $5,200 in 2012 and beyond. Any additional amounts 
realized in future grants awards could vary depending on the 
underlying discretionary maximum award level set in annual 
appropriation acts. CBO estimates that the outlays associated 
with those increases would total $5.8 billion over the 2008-
2012 period and $18.2 billion over the 2008-2017 period.
    TEACH Grants. Beginning in academic year 2008-2009, H.R. 
2669 would establish a new grant program for students who meet 
certain criteria and submit an agreement to teach specific 
high-need subjects, such as mathematics and science, for at 
least 4 years in schools that meet criteria for enrollment of 
low-income students. Each undergraduate participant would be 
eligible for up to $4,000 (plus $500 for a Bonus TEACH grant 
for some students) up to a maximum of $16,000 ($18,000 for 
those participating in the Bonus TEACH Program); graduate 
students would be eligible for up to a maximum of $8,000 
($10,000 for those participating in the Bonus TEACH program). 
CBO estimates costs for this grant program would total $0.4 
billion over the 2008-2012 period and $0.9 billion over the 
2008-2017 period.
    To be eligible for a TEACH grant, a student would have to 
meet the following requirements:
          
 Maintain a grade point average of at least 
        3.25 and display high academic aptitude on certain 
        admissions tests; and
          
 Engage in coursework and other requirements 
        necessary to begin a career in teaching.
    If the grant recipient fails to complete the service 
requirement, the grants would become a direct loan that the 
recipient would have to repay with interest.
    CBO estimates that more than 25,000 students would 
participate in the grant program in a typical year. CBO bases 
this estimate on data from the Department of Education, 
including the Digest of Education Statistics, the Condition of 
Education, the Schools and Staffing Survey, Teacher Attrition 
and Mobility, and the National Postsecondary Student Aid Study.
    Academic Competitiveness Grant and SMART Grant Programs. 
The bill would adjust how a student's academic year is 
determined and expand eligibility to part-time students for 
both the Academic Competitiveness and SMART grant programs. 
Currently, only full-time students are eligible for grants. 
Because funding for these programs is capped at specified 
amounts and the Secretary has the authority to proportionately 
reduce award levels to stay within the provided amounts, CBO 
estimates these changes would have no net impact on federal 
spending over the 2008-2012 or 2008-2017 periods.
    Incentives and Rewards for Low Tuition. The bill would 
appropriate $15 million per year for 2008 through 2012 to 
provide grants to institutions that increase their tuition by 
less than the national average. The Secretary of Education 
would award grants to the institutions starting with the one 
with the lowest tuition increase, and continuing until the 
funds are exhausted. The grants would be used to increase Pell 
grants at the institution by 25 percent. CBO estimates that 
outlays would increase by $74 million over five years and by 
$75 million over 10 years.
    Grants to Institutions of Higher Education. H.R. 2669 would 
appropriate funds for the existing Federal Perkins Loan Program 
and create several new grant programs for institutions of 
higher education. Combined, these changes would cost $1.3 
billion over the 2008-2012 period and $1.5 billion over the 
2008-2017 period. Estimated outlays reflect the historical 
patterns of spending for higher education programs and other 
federal grant programs.
    Federal Perkins Loan Program. The bill would appropriate 
$100 million each year for fiscal years 2008 through 2012 for 
capital contributions to the existing Federal Perkins Loan 
Program. CBO estimates this provision would increase outlays by 
$407 million between 2008 and 2012 and by $500 over 10 years.
    Cooperative Education Rewards Program. Under this new 
program, $15 million a year for 2008 through 2012 would be 
available to support programs for students that provide 
alternating or parallel periods of academic study and of public 
or private employment. The grants would range from $1,000 to 
$75,000 annually, and the grants would have to be matched by 
the institutions. The federal share would decline in stages 
over five years from 85 percent to 25 percent. CBO estimates 
the grant program would increase outlays by $75 million over 
the 2008-2017 period.
    Centers of Excellence. H.R. 2669 would set up a new grant 
program to encourage minority institutions to create centers of 
excellence that would focus on implementing policies that would 
improve the preparation of teachers. Funding for the centers 
would total $50 million for the 2008-2012 period, with a 
minimum grant of $500,000 for any participating institution. 
CBO estimates that all of the outlays associated with those 
grants would occur during the 2008-2012 period.
    Upward Bound. The bill would appropriate $30 million for 
each of fiscal years 2008 through 2011 to provide funding to 
Upward Bound projects that received assistance in fiscal year 
2006 but not in fiscal year 2007 and that also received a grant 
score above a certain level. CBO estimates that this provision 
would increase outlays by $109 million over five years and $120 
million over 10 years.
    Investment in Historically Black Colleges and Universities 
and Other Minority Serving Institutions. The bill also would 
create the Investment in Historically Black Colleges and 
Universities and Other Minority Serving Institutions to provide 
grants to such institutions to enhance their undergraduate 
programs in educating and training under-represented 
populations in all areas of study. For the purposes of this 
estimate, CBO assumes the program would expire after 2012, and 
thus would not result in any new budget authority after that 
year. H.R. 2669 would appropriate $100 million for each of 
fiscal years 2008 through 2012, resulting in a total cost of 
$500 million over 10 years.
    College Access Challenge Grants Program. H.R. 2669 would 
appropriate $300 million in fiscal year 2008 to create the 
College Access Challenge Grants. The funds, which would be 
available for obligation through fiscal year 2012, would be 
used to award grants to philanthropic organizations that are 
members of eligible consortia to provide: (1) need-based 
grants, (2) school-based mentoring programs, and (3) outreach 
programs to encourage students to pursue higher education. CBO 
estimates outlays would total $300 million over the 2008-2012 
period.

Spending subject to appropriation

    Implementing H.R. 2669 would also result in additional 
discretionary spending. The vast majority of additional 
discretionary spending would result from the reauthorization 
of, and changes to, the Pell Grant Program. Projected spending 
subject to appropriation is summarized in Table 3. For this 
estimate, CBO assumes that the necessary amounts to implement 
the bill will be appropriated and that spending will follow the 
historical pattern for the program.
    H.R. 2669 would authorize the appropriation of such sums as 
may be necessary for the Pell Grant program through fiscal year 
2013. The General Education Provisions Act would automatically 
extend this authorization through 2014. This estimate assumes 
that sufficient funds are appropriated to provide the maximum 
grant to all students eligible for it. On that basis, CBO 
estimates that the cumulative changes in H.R. 2669 would 
increase outlays for Pell grants by $6.8 billion in 2008 and 
$158.0 billion over the 2008-2012 period. If funding were 
enacted at the authorized levels, CBO estimates that 5.7 
million students would receive grants in academic year 2008-
2009 and 6.5 million would receive grants in 2012-2013, up from 
the 5.3 million that CBO estimates will receive grants in the 
upcoming 2007-2008 academic year.
    Pell Grants. The bill would make several changes to the 
underlying Pell Grant program. First, it would set the 
authorized maximum award level at $7,600 for academic year 
2008-2009 and raise it by $1,000 each academic year up to 
$11,600 for academic year 2012-2013.
    Historically, the authorized maximum award level has been 
replaced with a lower maximum award level during the 
appropriations process. The maximum award level for Pell grants 
for the upcoming academic year (2007-2008) was set by the 
Revised Continuing Appropriations Resolution, 2007 (Public Law 
110-5) at $4,310.
    Effective upon enactment, the bill also would eliminate the 
tuition sensitivity provision, which reduces Pell awards for 
some students who attend low-cost postsecondary institutions. 
In addition, beginning in academic year 2009-2010 it would 
allow students who attend year-round institutions to receive 
multiple Pell grants in the same academic year. Assuming the 
appropriation of the necessary amounts, CBO estimates that 
these provisions would cost $6.8 billion in 2008 and $153.0 
billion through 2012.
    Other portions of the bill would make changes to the 
formulas for calculating who is eligible for Pell grants and 
how much each applicant would receive. Those changes, described 
below, would not take effect until the 2009-2010 academic year. 
CBO's estimate assumes that funding for the maximum authorized 
award level would be provided. If the appropriated award level 
is set below the authorized level, the ultimate costs would be 
lower.

               TABLE 3.--ESTIMATED DISCRETIONARY COSTS FOR THE PELL GRANT PROGRAM UNDER H.R. 2669
----------------------------------------------------------------------------------------------------------------
                                                            By fiscal year, in millions of dollars--
                                               -----------------------------------------------------------------
                                                   2007       2008       2009       2010       2011       2012
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATIONPell Grant Spending Under Current Law:
    Budget Authority..........................     13,661          0          0          0          0          0
    Estimated Outlays.........................     13,179     10,660        281          0          0          0
Proposed Changes:
    Pell Grants:
        Estimated Authorization Level.........          0     28,311     33,166     37,906     42,822     48,454
        Estimated Outlays.....................          0      6,795     28,910     34,206     38,991     44,076
    Income Protection Allowances:
        Estimated Authorization Level.........          0          0        327        714      1,084      1,420
        Estimated Outlays.....................          0          0         78        413        795      1,157
    Simplified Needs Test and Automatic Zero:
        Estimated Authorization Level.........          0          0        330        364        403        422
        Estimated Outlays.....................          0          0         79        332        373        407
    Definition and Treatment of Untaxed
     Income:
        Estimated Authorization Level.........          0          0        581        658        747        806
        Estimated Outlays.....................          0          0        139        588        678        759
    Interactions:
        Estimated Authorization Level.........          0          0       -237       -256       -272       -322
        Estimated Outlays.....................          0          0        -57       -237       -259       -284
        Total Changes:
            Estimated Authorization Level.....          0     28,311     34,167     39,386     44,784     50,780
            Estimated Outlays.................          0      6,795     29,150     35,302     40,577     46,115
Pell Grant Spending Under H.R. 2669 \1\
    Estimated Authorization Level \2\.........     13,661     28,311     34,167     39,386     44,784     50,780
    Estimated Outlays.........................     13,179     17,455     29,431     35,302     40,577    46,115
----------------------------------------------------------------------------------------------------------------
\1\ In addition to the discretionary spending for Pell grants shown in this table, H.R. 2669 also would provide
  a new mandatory add-on to the Pell Grant Program. Those funds would constitute direct spending, and would
  total $5.8 billion over the 2008-2012 period and $18.2 billion over the 2008-2017 period as shown in table 2
  (on page 5 of this estimate).
\2\ The Concurrent Resolution on the Budget for Fiscal Year 2006 (H. Con. Res. 95) requires that, for budget
  enforcement purposes, the estimate of new discretionary budget authority for the Pell Grant program include
  the accumulated shortfall or surplus from prior award years. The current estimated shortfall for fiscal year
  2008 is $258 million. This amount is not included in figures in the table.

    Income Protection Allowances. H.R. 2669 would raise the 
income protection allowances for both dependent and independent 
students (but not for parents of dependent students). The 
income protection allowance is a set amount of a student's 
income that is not counted toward his or her expected family 
contribution. Under current law, these allowances are inflated 
by the Consumer Price Index (CPI) each year. This legislation 
would increase these levels for academic years 2009-2010 
through 2012-2013 at rates greater than inflation and then 
return to CPI adjustments after academic year 2012-2013. CBO 
estimates that this provision would cost $2.4 billion through 
2012.
    Simplified Needs Test and Automatic Zero Changes. The bill 
would raise the income level at which a student automatically 
qualifies to have no expected family contribution from $20,000 
to $30,000, beginning in academic year 2009-2010. It also would 
inflate this level by the CPI for each academic year after 
2009-2010. H.R. 2669 would change eligibility for the 
simplified needs test and expand the discretion of financial 
aid officers. CBO estimates that implementing these changes 
would cost $1.2 billion over the 2008-2012 period.
    Definitions and Treatment of Untaxed Income. The bill would 
eliminate certain categories of untaxed income, such as the 
earned income tax credit and welfare and Social Security 
benefits, from the calculation of total income for students and 
parents. It also would change the treatment of education 
savings accounts. CBO estimates that these changes would cost 
$2.2 billion through 2012.
    Interactions. The cumulative impact of the above changes to 
the Pell Grant program is less than when each is measured 
separately from current law because their effects overlap. For 
example, a student may be eligible for the maximum Pell grant 
because of both the increased income protection allowances and 
the increase in the automatic zero expected family contribution 
level. As a result, the combined effect of these changes is 
$840 million less over the 2008-2012 period than when each 
change is estimated separately.
    Intergovernmental and private-sector impact: H.R. 2669 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments. The bill would authorize funding for 
student aid and higher education programs and increase 
requirements for public colleges and universities that 
participate in voluntary federal programs. Any costs to those 
institutions or to state, local, or tribal governments would 
result from complying with conditions for receiving federal 
assistance.
    Estimate prepared by: Federal Costs: Deborah Kalcevic and 
Justin Humphrey; Impact on State, Local, and Tribal 
Governments: Lisa Ramirez-Branum; Impact on the Private Sector: 
Nabeel A. Alsalam.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

      XIII. Statement of General Performance Goals and Objectives

    In accordance with clause 3(c) of rule XIII of the House of 
Representatives, the goal of H.R. 2669 is to amend the Higher 
Education Act consistent with the policy announced in the 
Committee's budget instructions to reduce the deficit by 
$750,000,000 for the period of fiscal years 2007 through 2012 
without reducing assistance that makes college more affordable 
for students. The Committee expects the Department of Education 
to comply with H.R. 2669 and implement the changes to the law 
in accordance with these stated goals.

                XIV. Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the House of 
Representatives, the Committee must include a statement citing 
the specific powers granted to Congress in the Constitution to 
enact the law proposed by H.R. 2669. The Committee believes 
that the amendments made by this bill are within Congress' 
authority under Article I, section 8, clause 1 of the U.S. 
Constitution.

                         XV. Committee Estimate

    Clause 3(d)(2) of rule XIII of the House of Representatives 
requires an estimate and a comparison of the costs that would 
be incurred in carrying out H.R. 2669. However, clause 
3(d)(3)(B) of that rule provides that this requirement does not 
apply when the Committee has included in its report a timely 
submitted cost estimate of the bill prepared by the Director of 
the Congressional Budget Office under section 402 of the 
Congressional Budget Act.

       XVI. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

HIGHER EDUCATION ACT OF 1965

           *       *       *       *       *       *       *



TITLE I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


                    PART C--COST OF HIGHER EDUCATION

[SEC. 131. IMPROVEMENTS IN MARKET INFORMATION AND PUBLIC ACCOUNTABILITY 
                    IN HIGHER EDUCATION.

  [(a) Improved Data Collection.--
          [(1) Development of uniform methodology.--The 
        Secretary shall direct the Commissioner of Education 
        Statistics to convene a series of forums to develop 
        nationally consistent methodologies for reporting costs 
        incurred by postsecondary institutions in providing 
        postsecondary education.
          [(2) Redesign of data systems.--On the basis of the 
        methodologies developed pursuant to paragraph (1), the 
        Secretary shall redesign relevant parts of the 
        postsecondary education data systems to improve the 
        usefulness and timeliness of the data collected by such 
        systems.
          [(3) Information to institutions.--The Commissioner 
        of Education Statistics shall--
                  [(A) develop a standard definition for the 
                following data elements:
                          [(i) tuition and fees for a full-time 
                        undergraduate student;
                          [(ii) cost of attendance for a full-
                        time undergraduate student, consistent 
                        with the provisions of section 472;
                          [(iii) average amount of financial 
                        assistance received by an undergraduate 
                        student who attends an institution of 
                        higher education, including--
                                  [(I) each type of assistance 
                                or benefit described in section 
                                428(a)(2)(C)(i) ;
                                  [(II) fellowships; and
                                  [(III) institutional and 
                                other assistance; and
                          [(iv) number of students receiving 
                        financial assistance described in each 
                        of subclauses (I), (II), and (III) of 
                        clause (iii);
                  [(B) not later than 90 days after the date of 
                enactment of the Higher Education Amendments of 
                1998, report the definitions to each 
                institution of higher education and within a 
                reasonable period of time thereafter inform the 
                Committee on Labor and Human Resources of the 
                Senate and the Committee on Education and the 
                Workforce of the House of Representatives of 
                those definitions; and
                  [(C) collect information regarding the data 
                elements described in subparagraph (A) with 
                respect to at least all institutions of higher 
                education participating in programs under title 
                IV, beginning with the information from 
                academic year 2000-2001 and annually 
                thereafter.
  [(b) Data Dissemination.--The Secretary shall make available 
the data collected pursuant to subsection (a). Such data shall 
be available in a form that permits the review and comparison 
of the data submissions of individual institutions of higher 
education. Such data shall be presented in a form that is 
easily understandable and allows parents and students to make 
informed decisions based on the costs for typical full-time 
undergraduate students.
  [(c) Study.--
          [(1) In general.--The Commissioner of Education 
        Statistics shall conduct a national study of 
        expenditures at institutions of higher education. Such 
        study shall include information with respect to--
                  [(A) the change in tuition and fees compared 
                with the consumer price index and other 
                appropriate measures of inflation;
                  [(B) faculty salaries and benefits;
                  [(C) administrative salaries, benefits and 
                expenses;
                  [(D) academic support services;
                  [(E) research;
                  [(F) operations and maintenance; and
                  [(G) institutional expenditures for 
                construction and technology and the potential 
                cost of replacing instructional buildings and 
                equipment.
          [(2) Evaluation.--The study shall include an 
        evaluation of--
                  [(A) changes over time in the expenditures 
                identified in paragraph (1);
                  [(B) the relationship of the expenditures 
                identified in paragraph (1) to college costs; 
                and
                  [(C) the extent to which increases in 
                institutional financial aid and tuition 
                discounting practices affect tuition increases, 
                including the demographics of students 
                receiving such discounts, the extent to which 
                financial aid is provided to students with 
                limited need in order to attract a student to a 
                particular institution, and the extent to which 
                Federal financial aid, including loan aid, has 
                been used to offset the costs of such 
                practices.
          [(3) Final report.--The Commissioner of Education 
        Statistics shall submit a report regarding the findings 
        of the study required by paragraph (1) to the 
        appropriate committees of Congress not later than 
        September 30, 2002.
          [(4) Higher education market basket.--The Bureau of 
        Labor Statistics, in consultation with the Commissioner 
        of Education Statistics, shall develop a higher 
        education market basket that identifies the items that 
        comprise the costs of higher education. The Bureau of 
        Labor Statistics shall provide a report on the market 
        basket to the Committee on Labor and Human Resources of 
        the Senate and the Committee on Education and the 
        Workforce of the House of Representatives not later 
        than September 30, 2002.
          [(5) Fines.--In addition to actions authorized in 
        section 487(c), the Secretary may impose a fine in an 
        amount not to exceed $25,000 on an institution of 
        higher education for failing to provide the information 
        described in paragraph (1) in a timely and accurate 
        manner, or for failing to otherwise cooperate with the 
        National Center for Education Statistics regarding 
        efforts to obtain data on the cost of higher education 
        under this section and pursuant to the program 
        participation agreement entered into under section 487.
  [(d) Student Aid Recipient Survey.--(1) The Secretary shall 
survey student aid recipients on a regular cycle, but not less 
than once every 3 years--
          [(A) to identify the population of students receiving 
        Federal student aid;
          [(B) to determine the income distribution and other 
        socioeconomic characteristics of federally aided 
        students;
          [(C) to describe the combinations of aid from State, 
        Federal, and private sources received by students from 
        all income groups;
          [(D) to describe the debt burden of loan recipients 
        and their capacity to repay their education debts; and
          [(E) to disseminate such information in both 
        published and machine readable form.
  [(2) The survey shall be representative of full-time and 
part-time, undergraduate, graduate, and professional and 
current and former students in all types of institutions, and 
should be designed and administered in consultation with the 
Congress and the postsecondary education community.]

SEC. 131. CONSUMER INFORMATION AND PUBLIC ACCOUNTABILITY IN HIGHER 
                    EDUCATION.

  (a) College Opportunity On-Line (Cool) Website Re-Design 
Process.--In carrying out this section, the Commissioner of 
Education Statistics--
          (1) shall identify the data elements related to 
        college costs that are of greatest importance to 
        prospective students, enrolled students, and their 
        families, paying particular attention to low-income, 
        non-traditional student populations, and first-
        generation college students;
          (2) shall convene a group of individuals with 
        expertise in the collection and reporting of data 
        related to institutions of higher education, the use of 
        consumer data, and consumer marketing in general to--
                  (A) determine the relevance of particular 
                data elements to prospective students, enrolled 
                students, and families;
                  (B) assess the cost-effectiveness of various 
                ways in which institutions of higher education 
                might produce relevant data;
                  (C) determine the general comparability of 
                the data across institutions of higher 
                education; and
                  (D) make recommendations regarding the 
                inclusion of specific data items and the most 
                effective and least burdensome methods of 
                collecting and reporting useful data from 
                institutions of higher education; and
          (3) shall ensure that the redesigned COOL website--
                  (A) uses, to the extent practicable, data 
                elements currently provided by institutions of 
                higher education to the Secretary;
                  (B) includes clear and uniform information 
                determined to be relevant to prospective 
                students, enrolled students, and families;
                  (C) provides comparable information, by 
                ensuring that data are based on accepted 
                criteria and common definitions;
                  (D) includes a sorting function that permits 
                users to customize their search for and 
                comparison of institutions of higher education 
                based on the information identified through the 
                process as prescribed in paragraph (1) as being 
                of greatest relevance to choosing an 
                institution of higher education.
  (b) Data Collection.--
          (1) Data system.--The Commissioner of Education 
        Statistics shall continue to redesign the relevant 
        parts of the Integrated Postsecondary Education Data 
        System to include additional data as required by this 
        section and to continue to improve the usefulness and 
        timeliness of data collected by such System in order to 
        inform consumers about institutions of higher 
        education.
          (2) College consumer profile.--The Secretary shall 
        continue to publish on the COOL website, for each 
        academic year and in accordance with standard 
        definitions developed by the Commissioner of Education 
        Statistics (including definitions developed under 
        section 131(a)(3)(A) as in effect on the day before the 
        date of enactment of the College Cost Reduction Act of 
        2007), from at least all institutions of higher 
        education participating in programs under title IV the 
        following information:
                  (A) The tuition and fees charged for a first-
                time, full-time undergraduate student.
                  (B) The room and board charges for a first-
                time, full-time undergraduate student.
                  (C) The price of attendance for a first-time, 
                full-time undergraduate student, consistent 
                with the provisions of section 472.
                  (D) The average amount of financial 
                assistance received by a first-year, full-time 
                undergraduate student, including--
                          (i) each type of assistance or 
                        benefits described in 428(a)(2)(C)(ii);
                          (ii) institutional and other 
                        assistance; and
                          (iii) Federal loans under parts B, D, 
                        and E of title IV.
                  (E) The number of first-time, full-time 
                undergraduate students receiving financial 
                assistance described in each clause of 
                subparagraph (D).
                  (F) The institutional instructional 
                expenditure per full-time equivalent student.
                  (G) Student enrollment information, including 
                information on the number and percentage of 
                full-time and part-time students, and the 
                number and percentage of resident and non-
                resident students.
                  (H) Faculty-to-student ratios.
                  (I) Faculty information, including the total 
                number of faculty and the percentage of faculty 
                who are full-time employees of the institution 
                and the percentage who are part-time.
                  (J) Completion and graduation rates of 
                undergraduate students, identifying whether the 
                completion or graduation rates are from a 2-
                year or 4-year program of instruction and, in 
                the case of a 2-year program of instruction, 
                the percentage of students who transfer to 4-
                year institutions prior or subsequent to 
                completion or graduation.
                  (K) A link to the institution of higher 
                education with information of interest to 
                students including mission, accreditation, 
                student services (including services for 
                students with disabilities), transfer of credit 
                policies, any articulation agreements entered 
                into by the institution, and, if appropriate, 
                placement rates and other measures of success 
                in preparing students for entry into or 
                advancement in the workforce.
                  (L) The college affordability information 
                elements specified in subsection (c).
                  (M) Any additional information that the 
                Secretary may require.
  (c) College Affordability Information Elements.--The college 
affordability information elements required by subsection 
(b)(2)(L) shall include, for each institution submitting data--
          (1) the sticker price of the institution for the 3 
        most recent academic years;
          (2) the net tuition price of the institution for the 
        3 most recent academic years;
          (3) the percentage change in both the sticker price 
        and the net tuition price over the 3-year time period 
        that is being reported;
          (4) the percentage change in the higher education 
        price index (as defined in section 401B(d)) over the 
        same 3-year time period; and
          (5) whether the institution has been placed on 
        affordability alert status as required by subsection 
        (d)(2).
  (d) Outcomes and Actions.--
          (1) Response from institution.--Effective on June 30, 
        2008, an institution that increases its sticker price 
        at a percentage rate for any 3-year interval ending on 
        or after that date that exceeds two times the rate of 
        change in the higher education price index (as defined 
        in section 401B(d)) over the same time period shall 
        provide a report to the Secretary, in such a form, at 
        such time, and containing such information as the 
        Secretary may require. Such report shall be published 
        by the Secretary on the COOL website, and shall 
        include--
                  (A) a description of the factors contributing 
                to the increase in the institution's costs and 
                in the tuition and fees charged to students; 
                and
                  (B) if determinations of tuition and fee 
                increases are not within the exclusive control 
                of the institution, a description of the agency 
                or instrumentality of State government or other 
                entity that participates in such determinations 
                and the authority exercised by such agency, 
                instrumentality, or entity.
          (2) Consequences for 2-year continuation of 
        failure.--If the Secretary determines that an 
        institution that is subject to paragraph (1) has failed 
        to reduce the subsequent increase in sticker price to 
        equal to or below two times the rate of change in the 
        higher education price index (as defined in section 
        401B(d)) for 2 consecutive academic years subsequent to 
        the 3-year interval used under paragraph (1), the 
        Secretary shall place the institution on affordability 
        alert status.
          (3) Exemptions.--Notwithstanding paragraph (2), an 
        institution shall not be placed on affordability alert 
        status if, for any 3-year interval for which sticker 
        prices are computed under paragraph (1)--
                  (A) with respect the the class of 
                institutions described in paragraph (5) to 
                which the institution belongs, the sticker 
                price of the institution is in the lowest 
                quartile of institutions within such class, as 
                determined by the Secretary, during the last 
                year of such 3-year interval; or
                  (B) the institution has a percentage change 
                in its sticker price computed under paragraph 
                (1) that exceeds two times the rate of change 
                in the higher education price index (as defined 
                in section 401B(d)) over the same time period, 
                but the dollar amount of the sticker price 
                increase is less than $500.
          (4) Information to state agencies.--Any institution 
        that reports under paragraph (1)(B) that an agency or 
        instrumentality of State government or other entity 
        participates in the determinations of tuition and fee 
        increases shall, prior to submitting any information to 
        the Secretary under this subsection, submit such 
        information to, and request the comments and input of, 
        such agency, instrumentality, or entity. With respect 
        to any such institution, the Secretary shall provide a 
        copy of any communication by the Secretary with that 
        institution to such agency, instrumentality, or entity.
          (5) Classes of institutions.--For purposes of this 
        subsection, the classes of institutions shall be those 
        sectors used by the Integrated Postsecondary Education 
        Data System, based on whether the institution is 
        public, nonprofit private, or for-profit private, and 
        whether the institution has a 4-year, 2-year, or less 
        than 2-year program of instruction.
          (6) Data rejection.--Nothing in this subsection shall 
        be construed as allowing the Secretary to reject the 
        data submitted by an individual institution of higher 
        education.
  (e) Information to the Public.--The Secretary shall work with 
public and private entities to promote broad public awareness, 
particularly among middle and high school students and their 
families, of the information made available under this section, 
including by distribution to students who participate in or 
receive benefits from means-tested federally funded education 
programs and other Federal programs determined by the 
Secretary.
  (f) Fines.--In addition to actions authorized in section 
487(c), the Secretary may impose a fine in an amount not to 
exceed $25,000 on an institution of higher education for 
failing to provide the information required by this section in 
a timely and accurate manner, or for failing to otherwise 
cooperate with the National Center for Education Statistics 
regarding efforts to obtain data under subsection (c) and 
pursuant to the program participation agreement entered into 
under section 487.
  (g) Regulations.--The Secretary is authorized to issue such 
regulations as may be necessary to carry out the provisions of 
this section.
  (h) Definitions.--For the purposes of this section:
          (1) Net tuition price.--The term ``net tuition 
        price'' means the sticker price, minus the average 
        grants provided to such students, for any academic 
        year.
          (2) Sticker price.--The term ``sticker price'' means 
        the average tuition and fees charged to a first-time, 
        full-time, full-year undergraduate student by an 
        institution of higher education for any academic year.

SEC. 132. STATE COMMITMENT TO AFFORDABLE COLLEGE EDUCATION.

  (a) Maintenance of Effort Required.--No State shall reduce 
the total amount provided by the State for public institutions 
of higher education in such State for any academic year 
beginning on or after July 1, 2008, to an amount which is less 
than the average amount provided by such State to such 
institutions of higher education during the 5 most recent 
preceeding academic years for which satisfactory data is 
available.
  (b) Waiver.--The Secretary may waive the requirements of this 
section, if the Secretary determines that such a waiver would 
be equitable due to exceptional or uncontrollable 
circumstances, such as a natural disaster or a precipitous and 
unforeseen decline in the financial resources of the State 
educational agency.
  (c) Withholding of All Leap Funds for Violations.--
Notwithstanding any other provision of law, the Secretary of 
Education shall withhold from any State that violates 
subsection (a) (except a State that receives a waiver under 
subsection (b)) any amount that would otherwise be available to 
the State under the Leveraging Educational Assistance 
Partnership Program under subpart 4 of part A of title IV until 
such State has corrected such violation.-

           *       *       *       *       *       *       *


TITLE II--TEACHER QUALITY ENHANCEMENT

           *       *       *       *       *       *       *
                                   -

                     PART C--CENTERS OF EXCELLENCE

SEC. 231. DEFINITIONS

  As used in this part:
          (1) Eligible institution.--The term ``eligible 
        institution'' means--
                  (A) an institution of higher education that 
                has a teacher preparation program that meets 
                the requirements of section 203(b)(2)and that 
                is--
                          (i) a part B institution (as defined 
                        in section 322);
                          (ii) a Hispanic-serving institution 
                        (as defined in section 502);
                          (iii) a Tribal College or University 
                        (as defined in section 316);
                          (iv) an Alaska Native-serving 
                        institution (as defined in section 
                        317(b)); or
                          (v) a Native Hawaiian-serving 
                        institution (as defined in section 
                        317(b));
                  (B) a consortium of institutions described in 
                subparagraph (A); or
                  (C) an institution described in subparagraph 
                (A), or a consortium described in subparagraph 
                (B), in partnership with any other institution 
                of higher education, but only if the center of 
                excellence established under section 232 is 
                located at an institution described in 
                subparagraph (A).
          (2) Highly qualified.--The term ``highly qualified'' 
        when used with respect to an individual means that the 
        individual is highly qualified as determined under 
        section 9101 of the Elementary and Secondary Education 
        Act of 1965 (20 U.S.C. 7801) or section 602 of the 
        Individuals with Disabilities Education Act (20 U.S.C. 
        1401).
          (3) Scientifically based reading research.--The term 
        ``scientifically based reading research'' has the 
        meaning given such term in section 1208 of the 
        Elementary and Secondary Education Act of 1965 (20 
        U.S.C. 6368).
          (4) Scientifically based research.--The term 
        ``scientifically based research'' has the meaning given 
        such term in section 9101 of the Elementary and 
        Secondary Education Act of 1965 (20 U.S.C. 7801).

SEC. 232. CENTERS OF EXCELLENCE

  (a) Program Authorized.--From the amounts appropriated to 
carry out this part, the Secretary is authorized to award 
competitive grants to eligible institutions to establish 
centers of excellence.
  (b) Use of Funds.--Grants provided by the Secretary under 
this part shall be used to ensure that current and future 
teachers are highly qualified, by carrying out one or more of 
the following activities:
          (1) Implementing reforms within teacher preparation 
        programs to ensure that such programs are preparing 
        teachers who are highly qualified, are able to 
        understand scientifically based research, and are able 
        to use advanced technology effectively in the 
        classroom, including use for instructional techniques 
        to improve student academic achievement, by--
                  (A) retraining faculty; and
                  (B) designing (or redesigning) teacher 
                preparation programs that--
                          (i) prepare teachers to close student 
                        achievement gaps, are based on rigorous 
                        academic content, scientifically based 
                        research (including scientifically 
                        based reading research), and 
                        challenging State student academic 
                        content standards; and
                          (ii) promote strong teaching skills.
          (2) Providing sustained and high-quality preservice 
        clinical experience, including the mentoring of 
        prospective teachers by exemplary teachers, 
        substantially increasing interaction between faculty at 
        institutions of higher education and new and 
        experienced teachers, principals, and other 
        administrators at elementary schools or secondary 
        schools, and providing support, including preparation 
        time, for such interaction.
          (3) Developing and implementing initiatives to 
        promote retention of highly qualified teachers and 
        principals, including minority teachers and principals, 
        including programs that provide--
                  (A) teacher or principal mentoring from 
                exemplary teachers or principals; or
                  (B) induction and support for teachers and 
                principals during their first 3 years of 
                employment as teachers or principals, 
                respectively.
          (4) Awarding scholarships based on financial need to 
        help students pay the costs of tuition, room, board, 
        and other expenses of completing a teacher preparation 
        program.
          (5) Disseminating information on effective practices 
        for teacher preparation and successful teacher 
        certification and licensure assessment preparation 
        strategies.
          (6) Activities authorized under sections 202, 203, 
        and 204.
  (c) Application.--Any eligible institution desiring a grant 
under this section shall submit an application to the Secretary 
at such a time, in such a manner, and accompanied by such 
information as the Secretary may require.
  (d) Minimum Grant Amount.--The minimum amount of each grant 
under this part shall be $500,000.
  (e) Limitation on Administrative Expenses.--An eligible 
institution that receives a grant under this part may not use 
more than 2 percent of the grant funds for purposes of 
administering the grant.
  (f) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary to carry out this part.

SEC. 233. APPROPRIATIONS

  There shall be available to the Secretary, from funds not 
otherwise appropriated, $50,000,000 for the period beginning 
with fiscal year 2008 and ending with fiscal year 2012, to 
carry out this part beginning with academic year 2008--2009, 
which shall remain available until expended. The authority to 
carry out this part shall expire at the end of fiscal year 
2012.-

           *       *       *       *       *       *       *


TITLE IV--STUDENT ASSISTANCEPart A--Grants to Students in Attendance at 
Institutions of Higher Education

           *       *       *       *       *       *       *


                     Subpart 1--Federal Pell Grants

SEC. 401. FEDERAL PELL GRANTS: AMOUNT AND DETERMINATIONS; APPLICATIONS.

  (a) Program Authority and Method of Distribution.--(1) For 
each fiscal year through [fiscal year 2004] fiscal year 2013, 
the Secretary shall 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 
education, as an undergraduate, a Federal Pell 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 upon an amount 
requested by the institution as needed to pay eligible students 
until such time as the Secretary determines and publishes in 
the Federal Register with an opportunity for comment, an 
alternative payment system that provides payments to 
institutions in an accurate and timely manner,, except that 
this sentence shall not be construed to limit the authority of 
the Secretary to place an institution on a reimbursement system 
of payment.
  (2) Nothing in this section shall be interpreted to prohibit 
the Secretary from paying directly to students, in advance of 
the beginning 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) Grants made under this subpart shall be known as 
``Federal Pell Grants''.
  (b) Purpose and Amount of Grants.--(1) * * *
  [(2)(A) The amount of the Federal Pell Grant for a student 
eligible under this part shall be--
          [(i) $4,500 for academic year 1999-2000;
          [(ii) $4,800 for academic year 2000-2001;
          [(iii) $5,100 for academic year 2001-2002;
          [(iv) $5,400 for academic year 2002-2003; and
          [(v) $5,800 for academic year 2003-2004,
less an amount equal to the amount determined to be the 
expected family contribution with respect to that student for 
that year.]-
  (2)(A) The amount of the Federal Pell Grant for a student 
eligible under this part shall be--
          (i) $7,600 for academic year 2008--2009;
          (ii) $8,600 for academic year 2009--2010;
          (iii) $9,600 for academic year 2010--2011;
          (iv) $10,600 for academic year 2011--2012; and
          (v) $11,600 for academic year 2012--2013,
less an amount equal to the amount determined to be the 
expected family contribution with respect to that student for 
that year.

           *       *       *       *       *       *       *

  [(3)(A) For any academic year for which an appropriation Act 
provides a maximum basic grant in an amount in excess of 
$2,700, the amount of a student's basic grant shall equal 
$2,700 plus--
  [(i) one-half of the amount by which such maximum basic grant 
exceeds $2,700; plus
  [(ii) the lesser of--
          [(I) the remaining one-half of such excess; or
          [(II) the sum of the student's tuition and, if the 
        student has dependent care expenses (as described in 
        section 472(8)) or disability-related expenses (as 
        described in section 472(9)), an allowance determined 
        by the institution for such expenses.
  [(B) An institution that charged only fees in lieu of tuition 
as of October 1, 1998, may include in the institution's 
determination of tuition charged, fees that would normally 
constitute tuition.]
  [(4)] (3) No Federal Pell Grant under this subpart shall 
exceed the difference 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 student, it is determined that the 
amount of a Federal Pell Grant plus the amount of the expected 
family contribution for that student exceeds the cost of 
attendance for that year, the amount of the Federal Pell Grant 
shall be reduced until the combination of expected family 
contribution and the amount of the Federal Pell Grant does not 
exceed the cost of attendance at such institution.
  [(5)] (4) No Federal Pell Grant shall be awarded to a student 
under this subpart if the amount of that grant for that student 
as determined under this subsection for any academic year is 
less than $400, except that a student who is eligible for a 
Federal Pell Grant that is equal to or greater than $200 but 
less than $400 shall be awarded a Federal Pell Grant of $400.
  [(6)(A) The Secretary may allow, on a case-by-case basis, a 
student to receive 2 Pell grants during a single award year, 
if--
          [(i) the student is enrolled full-time in an 
        associate or baccalaureate degree program of study that 
        is 2 years or longer at an eligible institution that is 
        computed in credit hours; and
          [(ii) the student completes course work toward 
        completion of an associate or baccalaureate degree that 
        exceeds the requirements for a full academic year as 
        defined by the institution.
  (B) The Secretary shall promulgate regulations implementing 
this paragraph.]
          (5) Year-round pell grants.--The Secretary is 
        authorized, for students enrolled in a baccalaureate 
        degree, associate's degree, or certificate program of 
        study at an eligible institution, to award such 
        students not more than two Pell grants during an award 
        year to permit such students to accelerate progress 
        toward their degree or certificate objectives by 
        enrolling in courses for more than 2 semesters, or 3 
        quarters, or the equivalent, in a given academic year.
  [(7)] (6) Notwithstanding any other provision of this 
subpart, the Secretary shall allow the amount of the Federal 
Pell 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 
Federal Pell 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 financial 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)] (7) No Federal Pell Grant shall be awarded under this 
subpart to any individual who is incarcerated in any Federal or 
State penal institution.-
  (8) Additional funds.--
                  (A) In general.--There are authorized to be 
                appropriated, and there are appropriated, to 
                carry out subparagraph (B) of this paragraph 
                (in addition to any other amounts appropriated 
                to carry out this section and out of any money 
                in the Treasury not otherwise appropriated) the 
                following amounts:
                          (i) $840,000,000 for fiscal year 
                        2008;
                          (ii) $870,000,000 for fiscal year 
                        2009;
                          (iii) $1,340,000,000 for fiscal year 
                        2010;
                          (iv) $2,280,000,000 for fiscal year 
                        2011;
                          (v) $2,350,000,000 for fiscal year 
                        2012;
                          (vi) $2,400,000,000 for fiscal year 
                        2013;
                          (vii) $2,450,000,000 for fiscal year 
                        2014;
                          (viii) $2,510,000,000 for fiscal year 
                        2015;
                          (ix) $2,550,000,000 for fiscal year 
                        2016; and
                          (x) $2,570,000,000 for fiscal year 
                        2017.
                  (B) Increase in federal pell grants.--The 
                amounts made available pursuant to subparagraph 
                (A) of this paragraph shall be used to increase 
                the amount of the maximum Pell Grant for which 
                a student shall be eligible during an award 
                year, as specified in the last enacted 
                appropriation Act applicable to that award 
                year, by--
                          (i) $200 for each of the award years 
                        2008--2009 and 2009--2010;
                          (ii) $300 for award year 2010--2011; 
                        and
                          (iii) $500 for award year 2011--2012 
                        and each subsequent award year.
                  (C) Use of fiscal year funds for award 
                years.--The amounts made available by 
                subparagraph (A) for any fiscal year shall be 
                available and remain available for use under 
                subparagraph (B) for the award year that begins 
                in such fiscal year.-

           *       *       *       *       *       *       *


SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Definition of Eligible Student.--In this section the term 
``eligible student'' means a [full-time] student who, for the 
academic year for which the determination of eligibility is 
made--
          [(1) is a citizen of the United States;]-
          (1) is an eligible student under section 484, 
        including being enrolled or accepted for enrollment in 
        a degree, certificate, or other eligible program 
        leading to a recognized educational credential at an 
        institution of higher education;

           *       *       *       *       *       *       *

          (3) in the case of a student enrolled or accepted for 
        enrollment in--
                  (A) the first academic year of a program of 
                undergraduate education at a two- or four-year 
                degree-granting institution of higher 
                education--
                          (i) * * *
                          (ii) has not been previously enrolled 
                        in a program of undergraduate 
                        education, except as part of a 
                        secondary school program of study;

           *       *       *       *       *       *       *

  (d) Grant Award.--
          (1) * * *

           *       *       *       *       *       *       *
-
          (3) Adjustment for less than full-time enrollment.--A 
        grant awarded under this section to an eligible student 
        who attends an eligible institution on a less than 
        full-time (but at least half-time or more) basis shall 
        be reduced in the same proportion as would a Federal 
        Pell Grant pursuant to section 401(b)(2)(B).

           *       *       *       *       *       *       *
-
  (g) Determination of Academic Year.--Notwithstanding section 
481(a)(2), for the purpose of determining eligibility for a 
grant under this section, a student shall be considered to be 
enrolled or accepted for enrollment in the first, second, 
third, or fourth academic year of a program of undergraduate 
education based on the student's class standing, as determined 
by the institution of higher education at which the student is 
enrolled or accepted for enrollment.-
  [(g)] (h) Sunset Provision.--The authority to make grants 
under this section shall expire at the end of academic year 
2010-2011.-

SEC. 401B. INCENTIVES AND REWARDS FOR LOW TUITION.

  (a) Rewards for Low Tuition.--For an institution of higher 
education that, for academic year 2008--2009 or any succeeding 
academic year, has an annual net tuition price increase 
(expressed as a percentage) for the most recent academic year 
for which satisfactory data is available that is equal to or 
less than the percentage change in the higher education price 
index for such academic year, the Secretary shall provide such 
institution an amount sufficient to provide a 25 percent 
increase under subpart 1 of part A of title IV to each Pell 
Grant recipient attending such institution for the next award 
year beginning after the date of such determination. Each such 
institution shall distribute any amounts received under this 
subsection among such Pell Grant recipients by increasing the 
amount of their Pell Grant awards by 25 percent.
  (b) Rewards for Guaranteed Tuition.--
          (1) Bonus.--For each institution of higher education 
        that the Secretary of Education determines complies 
        with the requirements of paragraph (2) or (3) of this 
        subsection, the Secretary shall provide to such 
        institution a bonus amount equal to 25 percent of the 
        aggregate amount of aid received by students at the 
        institution under section 401(a). Such institution 
        shall award the bonus amount to the Pell Grant 
        recipients who were in attendance at the institution 
        during the award year that such institution satisfied 
        the eligibility criteria for maintaining low tuition 
        and fees. Each such student shall receive an amount 
        that equals 25 percent of their total Pell Grant award 
        for such award year, except that no student shall 
        recieve an amount under this section that would cause 
        the amount of total financial aid received by such 
        student to exceed the cost of attendance of the 
        institution. If there are additional funds remaining 
        after all eligible students have been paid from the 
        bonus amount, the institution shall award all excess 
        funds first to remaining Pell Grant recipients who were 
        not in attendance at the institution during such award 
        year, and then to other eligible students under this 
        title in attendance at such institution in the form of 
        need-based aid.
          (2) 4-year institutions.--An institution of higher 
        education that provides a program of instruction for 
        which it awards a bachelor's degree complies with the 
        requirements of this paragraph if such institution 
        guarantees that for any academic year beginning on or 
        after July 1, 2008, and for each of the 4 succeeding 
        continuous academic years, the net tuition price 
        charged to an undergraduate student will not exceed--
                  (A) the amount that the student was charged 
                for an academic year at the time he or she 
                first enrolled in the institution of higher 
                education, plus
                  (B) the product of the percentage increase in 
                the higher education price index for the prior 
                academic year, or the most recent prior 
                academic year for which data is available, 
                multiplied by the amount determined under 
                subparagraph (A).
          (3) Less-than 4-year institutions.--An institution of 
        higher education that does not provide a program of 
        instruction for which it awards a bachelor's degree 
        complies with the requirements of this paragraph if 
        such institution guarantees that for any academic year 
        (or the equivalent) beginning on or after July 1, 2008, 
        and for each of the 1.5 succeeding continuous academic 
        years, the net tuition price charged to an 
        undergraduate student will not exceed--
                  (A) the amount that the student was charged 
                for an academic year at the time he or she 
                first enrolled in the institution of higher 
                education, plus
                  (B) the product of the percentage increase in 
                the higher education price index for the prior 
                academic year, or the most recent prior 
                academic year for which data is available, 
                multiplied by the amount determined under 
                subparagraph (A).
  (c) Maintaining Affordable Tuition.--For any institution of 
higher education whose increase in the annual net tuition price 
(expressed as a percentage), for the most recent academic year 
for which satisfactory data is available, is greater than the 
percentage increase in the higher education price index for 
such academic year, the Secretary shall require such 
institution to submit to the Secretary the following 
information, within 6 months of such determination:
          (1) a detailed report on the exact causes for the net 
        tuition price increase that outlines revenues and 
        expenditures; and
          (2) cost containment strategies to lower net tuition 
        prices.
  (d) Priority.--In awarding incentives and rewards under this 
section, the Secretary shall give priority to institutions of 
higher education with the lowest annual net tuition price 
increase (expressed as a percentage) for the most recent 
academic year for which satisfactory data is available, when 
compared with other institutions of higher education with 
annual net tuition price increases that are equal to or less 
than the percentage change in the higher education price index 
for such academic year.
  (e) Definitions.--
          (1) Net tuition price.--The term ``net tuition 
        price'' has the same meaning as provided in section 
        131(k).
          (2) Higher education price index.--The term ``higher 
        education price index'' means a statistical measure of 
        change over time in the prices of a fixed market basket 
        of goods and services purchased by colleges and 
        universities through current fund educational and 
        general expenditures (excluding expenditures for 
        research), as developed by the Bureau of Labor 
        Statistics.
  (f) Funding.--There shall be available to the Secretary to 
carry out this section, from funds not otherwise appropriated, 
$15,000,000 for each of the fiscal years 2008 through 2012.
  (g) Sunset.--The authority to carry out this section shall 
expire at the end of fiscal year 2012.-

    Subpart 2--Federal Early Outreach and Student Services Programs

CHAPTER 1--FEDERAL TRIO PROGRAMS

           *       *       *       *       *       *       *


SEC. 402C. UPWARD BOUND.

  (a) * * *

           *       *       *       *       *       *       *
-
  (f) Absolute Priority Prohibited in Upward Bound Program.--
Except as otherwise expressly provided by amendment to this 
section, the Secretary shall not implement or enforce, and 
shall rescind, the absolute priority for Upward Bound Program 
participant selection and evaluation published by the 
Department of Education in the Federal Register on September 
22, 2006 (71 Fed. Reg. 55447 et seq.).
  (g) Additional Funds.--
          (1) Authorization and appropriation.--There are 
        authorized to be appropriated, and there are 
        appropriated to the Secretary, from funds not otherwise 
        appropriated, $30,000,000 for each of the fiscal years 
        2008 through 2011 to carry out paragraph (2), except 
        that any amounts that remain unexpended for such 
        purpose for each of such fiscal years may be available 
        for technical assistance and administration costs for 
        the Upward Bound program.
          (2) Use of funds.--The amounts made available by 
        paragraph (1) shall be available to provide assistance 
        to all Upward Bound projects that received assistance 
        in fiscal year 2006 but that did not receive assistance 
        in fiscal year 2007 (other than new applicants) with a 
        grant score above 70. Such assistance shall be made 
        available in the form of 4-year grants.-

           *       *       *       *       *       *       *
-

                        Subpart 9--TEACH Grants

SEC. 420L. PROGRAM ESTABLISHED.

  (a) Program Authority.--
          (1) Payments required.--The Secretary shall pay to 
        each eligible institution such sums as may be necessary 
        to pay to each eligible student (defined in accordance 
        with section 484) who files an application and 
        agreement in accordance with section 420M, and who 
        qualifies--
                  (A) under paragraph (2) of section 420M(a), a 
                TEACH Grant in the amount of $4,000 for each 
                academic year during which that student is in 
                attendance at the institution; and
                  (B) under paragraphs (2) and (3) of section 
                420M(a), a Bonus TEACH Grant in the amount of 
                $500 (in addition to the amount of the TEACH 
                Grant under subparagraph (A)) for each academic 
                year during which that student so qualifies.
          (2) Reference.--Grants made under--
                  (A) paragraph (1)(A) shall be known as 
                ``Teacher Education Assistance for College and 
                Higher Education Grants'' or ``TEACH Grants''; 
                and
                  (B) paragraph (1)(B) shall be known as Bonus 
                TEACH Grants.
  (b) Payment Methodology.--
          (1) Prepayment.--Not less than 85 percent of any 
        funds provided to an institution under subsection (a) 
        shall be advanced to eligible institutions prior to the 
        start of each payment period and shall be based upon an 
        amount requested by the institution as needed to pay 
        eligible students until such time as the Secretary 
        determines and publishes in the Federal Register with 
        an opportunity for comment, an alternative payment 
        system that provides payments to institutions in an 
        accurate and timely manner, except that this sentence 
        shall not be construed to limit the authority of the 
        Secretary to place an institution on a reimbursement 
        system of payment.
          (2) Direct payment.--Nothing in this section shall be 
        interpreted to prohibit the Secretary from paying 
        directly to students, in advance of the beginning 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) Distribution of grants to students.--Payments 
        under this subpart shall be made, in accordance with 
        regulations promulgated by the Secretary for such 
        purpose, in such manner as will best accomplish the 
        purposes of this subpart. Any disbursement allowed to 
        be made by crediting the student's account shall be 
        limited to tuition and fees and, in the case of 
        institutionally-owned housing, room and board. The 
        student may elect to have the institution provide other 
        such goods and services by crediting the student's 
        account.
  (c) Reductions in Amount.--
          (1) Part-time students.--In any case where a student 
        attends an institution of higher 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 a 
        grant under this subpart for which that student is 
        eligible shall be reduced in proportion to the degree 
        to which that student is not attending on a full-time 
        basis, in accordance with a schedule of reductions 
        established by the Secretary for the purposes of this 
        subpart, computed in accordance with this subpart. Such 
        schedule of reductions shall be established by 
        regulation and published in the Federal Register in 
        accordance with section 482 of this Act.
          (2) No exceeding cost.--The amount of a grant awarded 
        under this subpart, in combination with Federal 
        assistance and other student assistance, shall not 
        exceed the cost of attendance (as defined in section 
        472) at the institution at which that student is in 
        attendance. If, with respect to any student, it is 
        determined that the amount of a TEACH Grant or a Bonus 
        TEACH Grant exceeds the cost of attendance for that 
        year, the amount of the TEACH Grant or Bonus TEACH 
        Grant, respectively, shall be reduced until such grant 
        does not exceed the cost of attendance at such 
        institution.
  (d) Period of Eligibility for Grants.--
          (1) Undergraduate students.--The period during which 
        an undergraduate student may receive grants under this 
        subpart shall be the period required 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--
                  (A) any period during which the student is 
                enrolled in a noncredit or remedial course of 
                study as defined in paragraph (3) shall not be 
                counted for the purpose of this paragraph; and
                  (B) the total amount that a student may 
                receive under this subpart for undergraduate 
                study shall not exceed $16,000 with respect to 
                a student who receives only TEACH Grants, and 
                $18,000 with respect to a student who receives 
                TEACH Grants and Bonus TEACH Grants.
          (2) Graduate students.--The period during which a 
        graduate student may receive grants under this subpart 
        shall be the period required for the completion of a 
        master's degree course of study being pursued by that 
        student at the institution at which the student is in 
        attendance, except that the total amount that a student 
        may receive under this subpart for graduate study shall 
        not exceed $8,000 with respect to a student who 
        receives only TEACH Grants, and $10,000 with respect to 
        a student who receives TEACH Grants and Bonus TEACH 
        Grants.
          (3) Remedial course; study abroad.--Nothing in this 
        section shall exclude from eligibility courses of study 
        which are noncredit or remedial in nature (including 
        courses in English language acquisition) 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 certificate 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.

SEC. 420M. ELIGIBILITY; APPLICATIONS.

  (a) Applications; Demonstration of Eligibility.--
          (1) Filing required.--The Secretary shall from time 
        to time set dates by which students shall file 
        applications for grants under this subpart. Each 
        student desiring a grant under this subpart for any 
        year shall file an application containing such 
        information and assurances as the Secretary may deem 
        necessary to enable the Secretary to carry out the 
        functions and responsibilities of this subpart.
          (2) Demonstration of teach grant eligibility.--Each 
        application submitted under paragraph (1) for a TEACH 
        Grant shall contain such information as is necessary to 
        demonstrate that--
                  (A) if the applicant is an enrolled student--
                          (i) the student is an eligible 
                        student for purposes of section 484;
                          (ii) the student--
                                  (I) has a grade point average 
                                that is determined, under 
                                standards prescribed by the 
                                Secretary, to be comparable to 
                                a 3.25 average on a zero to 4.0 
                                scale, except that, if the 
                                student is in the first year of 
                                a program of undergraduate 
                                education, such grade point 
                                average shall be determined on 
                                the basis of the student's 
                                cumulative high school grade 
                                point average; or
                                  (II) displayed high academic 
                                aptitude by receiving a score 
                                above the 75th percentile on at 
                                least one of the batteries in 
                                an undergraduate or graduate 
                                school admissions test; and
                          (iii) the student is completing 
                        coursework and other requirements 
                        necessary to begin a career in 
                        teaching, or plans to complete such 
                        coursework and requirements prior to 
                        graduating; or
                  (B) if the applicant is a current or 
                prospective teacher applying for a grant to 
                obtain a graduate degree--
                          (i) the applicant is a teacher or a 
                        retiree from another occupation with 
                        expertise in a field in which there is 
                        a shortage of teachers, such as math, 
                        science, special education, English 
                        language acquisition, or another high-
                        need subject; or
                          (ii) the applicant is or was a 
                        teacher who is using high-quality 
                        alternative certification routes, such 
                        as Teach for America, to get certified.
          (3) Demonstration of bonus teach grant eligibility.--
        Each application submitted under paragraph (1) for a 
        Bonus TEACH Grant shall contain such information as is 
        necessary to demonstrate that the applicant is--
                  (A) eligible for, and has applied for, a 
                TEACH Grant; and
                  (B) a student enrolled in a qualified teacher 
                preparation program, as defined in section 
                420N.
  (b) Agreements to Serve.--Each application under subsection 
(a) shall contain or be accompanied by an agreement by the 
applicant that--
          (1) the applicant will--
                  (A) serve as a full-time teacher for a total 
                of not less than 4 academic years within 8 
                years after completing the course of study for 
                which the applicant received a TEACH Grant 
                under this subpart;
                  (B) teach in a school described in section 
                465(a)(2)(A);
                  (C) with respect to an applicant for--
                          (i) TEACH Grants, teach in any of the 
                        following fields: mathematics, science, 
                        a foreign language, bilingual 
                        education, or special education, or as 
                        a reading specialist, or another field 
                        documented as high-need by the Federal 
                        Government, State government, or local 
                        education agency and approved by the 
                        Secretary; or
                          (ii) TEACH Grants and Bonus TEACH 
                        Grants, teach mathematics, science, or 
                        a science-related field;
                  (D) submit evidence of such employment in the 
                form of a certification by the chief 
                administrative officer of the school upon 
                completion of each year of such service; and
                  (E) comply with the requirements for being a 
                highly qualified teacher as defined in section 
                9101 of the Elementary and Secondary Education 
                Act of 1965; and
          (2) in the event that the applicant is determined to 
        have failed or refused to carry out such service 
        obligation, the sum of the amounts of any TEACH Grants 
        and Bonus TEACH Grants received by such applicant will 
        be treated as a loan and collected from the applicant 
        in accordance with subsection (c) and the regulations 
        thereunder.
  (c) Repayment for Failure to Complete Service.--In the event 
that any recipient of a grant under this subpart fails or 
refuses to comply with the service obligation in the agreement 
under subsection (b), the sum of the amounts of any TEACH 
Grants and Bonus TEACH Grants received by such recipient shall 
be treated as a Direct Loan under part D of title IV, and shall 
be subject to repayment, together with interest thereon 
accruing after the period of service, in accordance with terms 
and conditions specified by the Secretary in regulations under 
this subpart.

SEC. 420N. DEFINITIONS.

  For the purposes of this subpart:
          (1) Eligible institution.--The term ``eligible 
        institution'' means an institution of higher education 
        as defined in section 102.
          (2) Qualified teacher preparation program.--The term 
        ``qualified teacher preparation program'' means a 
        program for students and teachers described in 
        subparagraph (A) or (B) of section 420M(a)(2) (referred 
        to jointly in this paragraph as ``teacher candidates'') 
        that--
                  (A) recruits and prepares teacher candidates 
                who major in science, technology fields, 
                special education, foreign language, 
                engineering, or mathematics disciplines to 
                become certified as elementary and secondary 
                teachers in those disciplines, special 
                education teachers, or teachers of English 
                Language Learners, with the goals of improving 
                teacher knowledge and effectiveness and 
                increasing elementary and secondary student 
                academic achievement;
                  (B) is implemented by an institution of 
                higher education in partnership with high-need 
                local educational agencies;
                  (C) offers a baccalaureate degree with a 
                concurrent teacher certification to teacher 
                candidates;
                  (D) is implemented in coordination with the 
                faculty of the relevant departments of the 
                institution of higher education;
                  (E) utilizes experienced teachers who have a 
                demonstrated record of success in teaching 
                underserved students to instruct teacher 
                candidates in the disciplines described in 
                subparagraph (A);
                  (F) provides teacher candidates with--
                          (i) support services, including 
                        mentoring by experienced teachers who 
                        have a demonstrated record of success 
                        in teaching underserved students;
                          (ii) exposure to, and field 
                        experience in, the classroom within the 
                        first year of entering the qualified 
                        teacher preparation program; and
                          (iii) other related support practices 
                        while the teacher candidates are 
                        participating in the program, and after 
                        such candidates graduate from the 
                        institution of higher education and are 
                        employed as teachers;
                  (G) participates in partnerships which 
                include the institution of higher education and 
                local educational agencies and charter 
                districts to provide opportunities for teacher 
                candidate field work;
                  (H) focuses on increasing the number of 
                teachers in the disciplines described in 
                subparagraph (A); and
                  (I) encourages individuals from 
                underrepresented populations to enter into the 
                teaching profession.

SEC. 420O. PROGRAM PERIOD AND FUNDING.

  There shall be available to the Secretary to carry out this 
subpart, from funds not otherwise appropriated, such sums as 
may be necessary to provide TEACH Grants and Bonus TEACH Grants 
in accordance with this subpart to each eligible applicant.-

Part B--Federal Family Education Loan Program

           *       *       *       *       *       *       *


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 
        student 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) * * *

           *       *       *       *       *       *       *

                  (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] $7,500; or

           *       *       *       *       *       *       *

          (2) Aggregate limits.--(A) The aggregate insured 
        unpaid principal amount for all such insured loans made 
        to any student shall not at any time exceed--
                  (i) [$23,000] $30,500, 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] $73,000, in the case of any 
                graduate or professional student (as defined by 
                regulations of the Secretary) 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 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 students who are pursuing programs which 
        the Secretary determines are exceptionally expensive.

           *       *       *       *       *       *       *


SEC. 427. ELIGIBILITY OF STUDENT BORROWERS AND TERMS OF FEDERALLY 
                    INSURED STUDENT LOANS.

  (a) List of Requirements.--Except as provided in section 
428C, a loan by an eligible lender shall be insurable by the 
Secretary under the provisions of this part only if--
          (1) * * *
          (2) evidenced by a note or other written agreement 
        which--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) provides that periodic installments of 
                principal need not be paid, but interest shall 
                accrue and be paid, during any period--
                          (i) * * *

           *       *       *       *       *       *       *

                          (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;

           *       *       *       *       *       *       *


SEC. 427A. APPLICABLE INTEREST RATES.

  (a) * * *

           *       *       *       *       *       *       *

  (l) Interest Rates for New Loans on or After July 1, 2006.--
          (1) * * *

           *       *       *       *       *       *       *
-
          (4) Reduced rates for undergraduate subsidized 
        loans.--Notwithstanding subsection (h) and paragraph 
        (1) of this subsection, with respect to any loan to an 
        undergraduate student made, insured, or guaranteed 
        under this part (other than a loan made pursuant to 
        section 428B, 428C, or 428H) for which the first 
        disbursement is made on or after July 1, 2006, and 
        before July 1, 2013, the applicable rate of interest 
        shall be as follows:
                  (A) For a loan for which the first 
                disbursement is made on or after July 1, 2006, 
                and before July 1, 2008, 6.80 percent on the 
                unpaid principal balance of the loan.
                  (B) For a loan for which the first 
                disbursement is made on or after July 1, 2008, 
                and before July 1, 2009, 6.12 percent on the 
                unpaid principal balance of the loan.
                  (C) For a loan for which the first 
                disbursement is made on or after July 1, 2009, 
                and before July 1, 2010, 5.44 percent on the 
                unpaid principal balance of the loan.
                  (D) For a loan for which the first 
                disbursement is made on or after July 1, 2010, 
                and before July 1, 2011, 4.76 percent on the 
                unpaid principal balance of the loan.
                  (E) For a loan for which the first 
                disbursement is made on or after July 1, 2011, 
                and before July 1, 2012, 4.08 percent on the 
                unpaid principal balance of the loan.
                  (F) For a loan for which the first 
                disbursement is made on or after July 1, 2012 
                and before July 1, 2013, 3.40 percent on the 
                unpaid principal balance of the loan.-

           *       *       *       *       *       *       *


SEC. 428. FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST COSTS.

  (a) * * *
  (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 entitling 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 provided for in subsection 
        (a) if the Secretary determines that the student loan 
        insurance program--
                  (A) authorizes the insurance in any academic 
                year, as defined in section 481(a)(2), or its 
                equivalent (as determined under regulations of 
                the Secretary) for any student who is carrying 
                at an eligible institution 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) * * *

           *       *       *       *       *       *       *

                          (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] $7,500; or

           *       *       *       *       *       *       *

                  (B) provides that the aggregate insured 
                unpaid principal amount for all such insured 
                loans made to any student shall be any amount 
                up to a maximum of--
                          (i) [$23,000] $30,500, 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] $73,000, in the case 
                        of any graduate or professional student 
                        (as defined by regulations of the 
                        Secretary), 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 became a graduate or 
                        professional student, but (II) 
                        excluding loans made under section 428A 
                        or 428B,

           *       *       *       *       *       *       *

                  [(G) insures 98 percent of the unpaid 
                principal of loans insured under the program, 
                except that--
                          [(i) such program shall insure 100 
                        percent of the unpaid principal of 
                        loans made with funds advanced pursuant 
                        to section 428(j) or 439(q);
                          [(ii) for any loan for which the 
                        first disbursement of principal is made 
                        on or after July 1, 2006, the preceding 
                        provisions of this subparagraph shall 
                        be applied by substituting ``97 
                        percent'' for ``98 percent''; and
                          [(iii) notwithstanding the preceding 
                        provisions of this subparagraph, such 
                        program shall insure 100 percent of the 
                        unpaid principal amount of exempt 
                        claims as defined in subsection 
                        (c)(1)(G);]-
                  (G) insures 95 percent of the unpaid 
                principal of loans insured under the program, 
                except that--
                          (i) such program shall insure 100 
                        percent of the unpaid principal of 
                        loans made with funds advanced pursuant 
                        to section 428(j) or 439(q); and
                          (ii) notwithstanding the preceding 
                        provisions of this subparagraph, such 
                        program shall insure 100 percent of the 
                        unpaid principal amount of exempt 
                        claims as defined in subsection 
                        (c)(1)(G);-

           *       *       *       *       *       *       *

                  (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) * * *

           *       *       *       *       *       *       *

                          (iv) [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;

           *       *       *       *       *       *       *

  (c) Guaranty Agreements for Reimbursing Losses.--
          (1) Authority to enter into agreements.--(A) * * *

           *       *       *       *       *       *       *

          [(D) Reimbursements of losses made by the Secretary 
        on loans submitted for claim by an eligible lender, 
        servicer, or guaranty agency designated for exceptional 
        performance under section 428I 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)] (D) 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) * * *

           *       *       *       *       *       *       *

          [(F)] (E) 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 approved by the Secretary in 
        response to the insolvency of the latter such guarantee 
        agency, the Secretary shall apply the provision of--
                  (i) * * *

           *       *       *       *       *       *       *

          [(G)] (F)(i) Notwithstanding any other provisions of 
        this section, in the case of exempt claims, the 
        Secretary shall apply the provisions of--
                  (I) * * *

           *       *       *       *       *       *       *

          [(H)] (G) Notwithstanding any other provision of this 
        section, the Secretary shall exclude a loan made 
        pursuant to a lender-of-last-resort program when making 
        reimbursement payment calculations under subparagraphs 
        (B) and (C).

           *       *       *       *       *       *       *

          (6) Secretary's equitable share.--(A) For the purpose 
        of paragraph (2)(D), the Secretary's equitable share of 
        payments made by the borrower shall be that portion of 
        the payments remaining after the guaranty agency with 
        which the Secretary has an agreement under this 
        subsection has deducted from such payments--
                  (i) * * *
                  [(ii) an amount equal to 24 percent of such 
                payments for use in accordance with section 
                422B, except that, beginning on October 1, 
                2003, this subparagraph shall be applied by 
                substituting ``23 percent'' for ``24 
                percent''.]
                  (ii) an amount equal to 23 percent of such 
                payments for use in accordance with section 
                422B, except that beginning October 1, 2007, 
                this subparagraph shall be applied by 
                substituting ``16 percent'' for ``23 percent''.

           *       *       *       *       *       *       *

  (k) Information on Defaults.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Student loan information.--
                  (A) Notwithstanding any other provision of 
                law or regulation, a lender, secondary market, 
                holder, or guaranty agency shall provide, free 
                of charge and in a timely and effective manner, 
                any student loan information maintained by that 
                entity that is requested by an institution of 
                higher education or any third-party servicer 
                (as defined in section 481(c)) working on 
                behalf of that institution to prevent student 
                loan defaults.
                  (B) An institution and any third-party 
                servicer obtaining access to information under 
                subparagraph (A) shall safeguard that 
                information in order to prevent potential 
                abuses of that information, including identity 
                theft.
                  (C) Any third party servicer that obtains 
                information under this paragraph--
                          (i) shall only use the information in 
                        a manner directly related to the 
                        default prevention work the servicer is 
                        performing on behalf of the institution 
                        of higher education; and
                          (ii) shall be subject to any 
                        regulations established by the 
                        Secretary pursuant to section 432 
                        concerning the misuse of such 
                        information, including any penalties 
                        for such misuse.

           *       *       *       *       *       *       *


[SEC. 428I. SPECIAL INSURANCE AND REINSURANCE 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 compliance performance rating that equals or 
        exceeds 97 percent, the Secretary shall designate the 
        eligible lender, servicer, or guaranty 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 determination is made. Such 
        rating is equal to the percent of all due diligence 
        requirements applicable to each loan, on average, as 
        established by the Secretary by regulation, with 
        respect to--
                  [(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) 99 Percent payment rule.--Each guaranty agency 
        shall pay each eligible lender or servicer (as agent 
        for an eligible lender) designated under subsection (a) 
        99 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 agency 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 received by the Secretary by 
        the date established by the Secretary or if the audit 
        indicates the lender or servicer failed to maintain 97 
        percent or higher compliance with program regulations, 
        as reflected in the performance of not less than 97 
        percent 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 submission of claims documentation 
        evidencing servicing performed on loans, except that 
        the guaranty agency may not require greater 
        documentation than that required for lenders and 
        servicers not designated under subsection (a).
          [(4) Payments to guaranty 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 (a) shall have a financial and compliance 
        audit of the loan portfolio of such eligible lender or 
        servicer conducted annually by a qualified independent 
        organization from a list of qualified organizations 
        promulgated by the Secretary in accordance with 
        standards established by the Comptroller General and 
        the Secretary. The standards shall measure the lender's 
        or servicer's compliance with the due diligence 
        standards and shall include a defined 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 the Secretary with such other information in 
        its possession regarding 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 application 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 exceptional lender or 
        servicer is established through a financial and 
        compliance audit, as described in subsection (c)(1)), 
        and submit the 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 
        pursuant 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 
        exceptional 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 subsection (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 lender or servicer may have engaged in 
        fraud in securing designation under subsection (a) or 
        is failing to service loans in accordance with program 
        regulations.
  [(d) Supervision of Designated Guaranty Agencies.--
          [(1) Audit of guaranty agencies.--Each guaranty 
        agency desiring a designation under subsection (a) 
        shall have a financial and compliance audit of the 
        defaulted loan portfolio of such guaranty agency 
        conducted annually by a qualified independent 
        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 Secretary. 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 
        require quarterly sample audits as a means of 
        determining continued 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 designated 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 designation 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 violation of section 3729 of title 31, United 
States Code, .
  [(h) Evaluation.--Not later than 3 years after the date of 
enactment 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 financial 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 perform 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 evaluation.
          [(7) A recommendation for modifications to this 
        section and whether the program should be continued.
  [(i) Termination.--After receipt of the study authorized in 
subsection (h), the Secretary may terminate such program if he 
determines 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 activities 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 collecting student loans which--
                  [(A) has substantial experience in servicing 
                and collecting consumer loans or student loans;
                  [(B) has an independent financial audit 
                annually which is furnished to the Secretary 
                and any other parties designated 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 
                shareholder, director, or officer of the entity 
                who has been convicted of a felony.]

           *       *       *       *       *       *       *


[SEC. 428K. LOAN FORGIVENESS FOR CHILD CARE PROVIDERS.

  [(a) Purpose.--It is the purpose of this section--
          [(1) to bring more highly trained individuals into 
        the early child care profession; and
          [(2) to keep more highly trained child care providers 
        in the early child care field for longer periods of 
        time.
  [(b) Definitions.--In this section:
          [(1) Child care facility.--The term ``child care 
        facility'' means a facility, including a home, that--
                  [(A) provides child care services; and
                  [(B) meets applicable State or local 
                government licensing, certification, approval, 
                or registration requirements, if any.
          [(2) Child care services.--The term ``child care 
        services'' means activities and services provided for 
        the education and care of children from birth through 
        age 5 by an individual who has a degree in early 
        childhood education.
          [(3) Degree.--The term ``degree'' means an 
        associate's or bachelor's degree awarded by an 
        institution of higher education.
          [(4) Early childhood education.--The term ``early 
        childhood education'' means education in the areas of 
        early child education, child care, or any other 
        educational area related to child care that the 
        Secretary determines appropriate.
          [(5) Institution of higher education.--
        Notwithstanding section 102, the term ``institution of 
        higher education'' has the meaning given the term in 
        section 101.
  [(c) Demonstration Program.--
          [(1) In general.--The Secretary may carry out a 
        demonstration program of assuming the obligation to 
        repay, pursuant to subsection (d), a loan made, 
        insured, or guaranteed under this part or part D 
        (excluding loans made under sections 428B and 428C or 
        comparable loans made under part D) for any new 
        borrower after the date of enactment of the Higher 
        Education Amendments of 1998, who--
                  [(A) completes a degree in early childhood 
                education;
                  [(B) obtains employment in a child care 
                facility; and
                  [(C) has worked full time for the 2 
                consecutive years preceding the year for which 
                the determination is made as a child care 
                provider in a low-income community.
          [(2) Low-income community.--For the purposes of this 
        subsection, the term ``low-income community'' means a 
        community in which 70 percent of households within the 
        community earn less than 85 percent of the State median 
        household income.
          [(3) Award basis; priority.--
                  [(A) Award basis.--Subject to subparagraph 
                (B), loan repayment under this section shall be 
                on a first-come, first-served basis and subject 
                to the availability of appropriations.
                  [(B) Priority.--The Secretary shall give 
                priority in providing loan repayment under this 
                section for a fiscal year to student borrowers 
                who received loan repayment under this section 
                for the preceding fiscal year.
          [(4) Regulations.--The Secretary is authorized to 
        prescribe such regulations as may be necessary to carry 
        out the provisions of this section.
  [(d) Loan Repayment.--
          [(1) In general.--The Secretary shall assume the 
        obligation to repay--
                  [(A) after the second consecutive year of 
                employment described in subparagraphs (B) and 
                (C) of subsection (c)(1), 20 percent of the 
                total amount of all loans made after date of 
                enactment of the Higher Education Amendments of 
                1998, to a student under this part or part D;
                  [(B) after the third consecutive year of such 
                employment, 20 percent of the total amount of 
                all such loans; and
                  [(C) after each of the fourth and fifth 
                consecutive years of such employment, 30 
                percent of the total amount of all such loans.
          [(2) Construction.--Nothing in this section shall be 
        construed to authorize the refunding of any repayment 
        of a loan made under this part or part D.
          [(3) Interest.--If a portion of a loan is repaid by 
        the Secretary 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 graduation from an institution 
        of higher education for the purpose of obtaining a 
        degree in early childhood education, the Secretary is 
        authorized to assume the obligation to repay the total 
        amount of loans made under this part or part D incurred 
        for a maximum of two academic years in returning to an 
        institution of higher education for the purpose of 
        obtaining a degree in early childhood education. Such 
        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 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. 12601 et 
        seq.).
  [(e) Repayment to Eligible Lenders.--The Secretary shall pay 
to each eligible lender or holder for each fiscal year an 
amount equal to the aggregate amount of loans which are subject 
to repayment pursuant to this section for such year.
  [(f) Application for Repayment.--
          [(1) In general.--Each eligible individual desiring 
        loan repayment under this section shall submit a 
        complete and accurate application to the Secretary at 
        such time, in such manner, and containing such 
        information as the Secretary may require.
          [(2) Conditions.--An eligible individual may apply 
        for loan repayment under this section after completing 
        each year of qualifying employment. The borrower shall 
        receive forbearance while engaged in qualifying 
        employment unless the borrower is in deferment while so 
        engaged.
  [(g) Evaluation.--
          [(1) In general.--The Secretary shall conduct, by 
        grant or contract, an independent national evaluation 
        of the impact of the demonstration program assisted 
        under this section on the field of early childhood 
        education.
          [(2) Competitive basis.--The grant or contract 
        described in subsection (b) shall be awarded on a 
        competitive basis.
          [(3) Contents.--The evaluation described in this 
        subsection shall--
                  [(A) determine the number of individuals who 
                were encouraged by the demonstration program 
                assisted under this section to pursue early 
                childhood education;
                  [(B) determine the number of individuals who 
                remain employed in a child care facility as a 
                result of participation in the program;
                  [(C) identify the barriers to the 
                effectiveness of the program;
                  [(D) assess the cost-effectiveness of the 
                program in improving the quality of--
                          [(i) early childhood education; and
                          [(ii) child care services;
                  [(E) identify the reasons why participants in 
                the program have chosen to take part in the 
                program;
                  [(F) identify the number of individuals 
                participating in the program who received an 
                associate's degree and the number of such 
                individuals who received a bachelor's degree; 
                and
                  [(G) identify the number of years each 
                individual participates in the program.
          [(4) Interim and final evaluation reports.--The 
        Secretary shall prepare and submit to the President and 
        the Congress such interim reports regarding the 
        evaluation described in this subsection as the 
        Secretary deems appropriate, and shall prepare and so 
        submit a final report regarding the evaluation by 
        January 1, 2002.
  [(h) Authorization of Appropriations.--There are authorized 
to be appropriated to carry out this section $10,000,000 for 
fiscal year 1999, and such sums as may be necessary for each of 
the 4 succeeding fiscal years.]-

SEC. 428K. LOAN FORGIVENESS FOR SERVICE IN AREAS OF NATIONAL NEED.

  (a) Program Authorized.--
          (1) Loan forgiveness authorized.--The Secretary shall 
        forgive, in accordance with this section, the student 
        loan obligation of a borrower in the amount specified 
        in subsection (c), for any new borrower after the date 
        of enactment of the College Cost Reduction Act of 2007, 
        who--
                  (A) is employed full-time in an area of 
                national need described in subsection (b); and
                  (B) is not in default on a loan for which the 
                borrower seeks forgiveness.
          (2) Method of loan forgiveness.--To provide loan 
        forgiveness under paragraph (1), the Secretary is 
        authorized to carry out a program--
                  (A) through the holder of the loan, to assume 
                the obligation to repay a qualified loan amount 
                for a loan made, insured, or guaranteed under 
                this part; and
                  (B) to cancel a qualified loan amount for a 
                loan made under part D of this title.
          (3) Regulations.--The Secretary is authorized to 
        issue such regulations as may be necessary to carry out 
        the provisions of this section.
  (b) Areas of National Need.--For purposes of this section, an 
individual shall be treated as employed in an area of national 
need if the individual is employed full-time as any of the 
following:
          (1) Early childhood educators.--An individual who is 
        employed as an early childhood educator in an eligible 
        preschool program or eligible early childhood education 
        program in a low-income community, and who is involved 
        directly in the care, development, and education of 
        infants, toddlers, or young children age 5 and under.
          (2) Nurses.--An individual who is employed--
                  (A) as a nurse in a clinical setting; or
                  (B) as a member of the nursing faculty at an 
                accredited school of nursing (as those terms 
                are defined in section 801 of the Public Health 
                Service Act (42 U.S.C. 296)).
          (3) Foreign language specialists.--An individual who 
        has obtained a baccalaureate degree in a critical 
        foreign language and is employed--
                  (A) in an elementary or secondary school as a 
                teacher of a critical foreign language; or
                  (B) in an agency of the United States 
                Government in a position that regularly 
                requires the use of such critical foreign 
                language.
          (4) Librarians.--An individual who is employed as a 
        librarian in--
                  (A) a public library that serves a geographic 
                area within which the public schools have a 
                combined average of 30 percent or more of their 
                total student enrollments composed of children 
                counted under section 1113(a)(5) of the 
                Elementary and Secondary Education Act of 1965; 
                or
                  (B) an 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 title I of the 
                Elementary and Secondary Education Act of 1965, 
                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 educational agency 
                of the State in which the school is located) to 
                be a school in which the enrollment of children 
                counted under section 1113(a)(5) of the 
                Elementary and Secondary Education Act of 1965 
                exceeds 30 percent of the total enrollment of 
                that school.
          (5) Highly qualified teachers: bilingual education 
        and low-income communities.--An individual who--
                  (A) is highly qualified as such term is 
                defined in section 9101 of the Elementary and 
                Secondary Education Act of 1965; and
                  (B)(i) is employed as a full-time teacher of 
                bilingual education; or
                  (ii) is employed as a teacher in a public or 
                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 title I of 
                the Elementary and Secondary Education Act of 
                1965, 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 educational 
                agency of the State in which the school is 
                located) to be a school in which the enrollment 
                of children counted under section 1113(a)(5) of 
                the Elementary and Secondary Education Act of 
                1965 exceeds 40 percent of the total enrollment 
                of that school.
          (6) Child welfare workers.--An individual who--
                  (A) has obtained a degree in social work or a 
                related field with a focus on serving children 
                and families; and
                  (B) is employed in public or private child 
                welfare services.
          (7) Speech-language pathologists.--An individual who 
        is a speech-language pathologist, who is employed in an 
        eligible preschool program or an elementary or 
        secondary school, and who has, at a minimum, a graduate 
        degree in speech-language pathology, or communication 
        sciences and disorders.
          (8) National service.--An individual who is engaged 
        as a participant in a project under the National and 
        Community Service Act of 1990 (as such terms are 
        defined in section 101 of such Act (42 U.S.C. 12511)).
          (9) Public sector employees.--An individual who is 
        employed in public safety (including as a first 
        responder, firefighter, police officer, or other law 
        enforcement or public safety officer), emergency 
        management (including as an emergency medical 
        technician), public health, or public interest legal 
        services (including prosecution or public defense).
  (c) Qualified Loan Amount.--At the end of each school, 
academic, or calendar year of full-time employment in an area 
of national need described in subsection (b), not to exceed 5 
years, the Secretary shall forgive not more than $1,000 of the 
student loan obligation of a borrower that is outstanding after 
the completion of each such school, academic, or calendar year 
of employment, as appropriate, not to exceed $5,000 in the 
aggregate for any borrower.
  (d) Construction.--Nothing in this section shall be construed 
to authorize the refunding of any repayment of a loan.
  (e) Segal Americorps Education Award and National Service 
Award Recipients.--A student borrower who qualifies for the 
maximum education award under subtitle D of title I of the 
National and Community Service Act of 1990 (42 U.S.C. 12601 et 
seq.) shall receive under this section the amount, if any, by 
which the maximum benefit available under this section exceeds 
the maximum education award available under such subtitle.
  (f) Ineligibility for Double Benefits.--No borrower may 
receive a reduction of loan obligations under both this section 
and section 428J or 460.
  (g) Definitions.--In this section:
          (1) Critical foreign language.--The term ``critical 
        foreign language'' includes the languages of Arabic, 
        Korean, Japanese, Chinese, Pashto, Persian-Farsi, 
        Serbian-Croatian, Russian, Portuguese, and any other 
        language identified by the Secretary of Education, in 
        consultation with the Defense Language Institute, the 
        Foreign Service Institute, and the National Security 
        Education Program, as a critical foreign language need.
          (2) Early childhood educator.--The term ``early 
        childhood educator'' means an early childhood educator 
        who works directly with children in an eligible 
        preschool program or eligible early childhood education 
        program who has completed a baccalaureate or advanced 
        degree in early childhood development, early childhood 
        education, or in a field related to early childhood 
        education.
          (3) Eligible preschool program.--The term ``eligible 
        preschool program'' means a program that provides for 
        the care, development, and education of infants, 
        toddlers, or young children age 5 and under, meets any 
        applicable State or local government licensing, 
        certification, approval, and registration requirements, 
        and is operated by--
                  (A) a public or private school that is 
                supported, sponsored, supervised, or 
                administered by a local educational agency;
                  (B) a Head Start agency serving as a grantee 
                designated under the Head Start Act (42 U.S.C. 
                9831 et seq.);
                  (C) a nonprofit or community based 
                organization; or
                  (D) a child care program, including a home.
          (4) Eligible early childhood education program.--The 
        term ``eligible early childhood education program'' 
        means--
                  (A) a family child care program, center-based 
                child care program, State prekindergarten 
                program, school program, or other out-of-home 
                early childhood development care program, 
                that--
                          (i) is licensed or regulated by the 
                        State; and
                          (ii) serves 2 or more unrelated 
                        children who are not old enough to 
                        attend kindergarten;
                  (B) a Head Start Program carried out under 
                the Head Start Act (42 U.S.C. 9831 et seq.); or
                  (C) an Early Head Start Program carried out 
                under section 645A of the Head Start Act (42 
                U.S.C. 9840a).
          (5) Low-income community.--In this subsection, the 
        term ``low-income community'' means a community in 
        which 70 percent of households earn less than 85 
        percent of the State median household income.
          (6) Nurse.--The term ``nurse'' means a nurse who 
        meets all of the following:
                  (A) The nurse graduated from--
                          (i) an accredited school of nursing 
                        (as those terms are defined in section 
                        801 of the Public Health Service Act 
                        (42 U.S.C. 296));
                          (ii) a nursing center; or
                          (iii) an academic health center that 
                        provides nurse training.
                  (B) The nurse holds a valid and unrestricted 
                license to practice nursing in the State in 
                which the nurse practices in a clinical 
                setting.
                  (C) The nurse holds one or more of the 
                following:
                          (i) A graduate degree in nursing, or 
                        an equivalent degree.
                          (ii) A nursing degree from a 
                        collegiate school of nursing (as 
                        defined in section 801 of the Public 
                        Health Service Act (42 U.S.C. 296)).
                          (iii) A nursing degree from an 
                        associate degree school of nursing (as 
                        defined in section 801 of the Public 
                        Health Service Act (42 U.S.C. 296)).
                          (iv) A nursing degree from a diploma 
                        school of nursing (as defined in 
                        section 801 of the Public Health 
                        Service Act (42 U.S.C. 296)).
          (7) Speech-language pathologist.--The term ``speech-
        language pathologist'' means a speech-language 
        pathologist who--
                  (A) has received, at a minimum, a graduate 
                degree in speech-language pathology or 
                communication sciences and disorders from an 
                institution of higher education accredited by 
                an agency or association recognized by the 
                Secretary pursuant to section 496(a) of this 
                Act; and
                  (B) provides speech-language pathology 
                services under section 1861(ll)(1) of the 
                Social Security Act (42 U.S.C. 1395x(ll)(1), or 
                meets or exceeds the qualifications for a 
                qualified speech-language pathologist under 
                subsection (ll)(3) of such section (42 U.S.C. 
                1395x(ll)(3)).
  (h) Program Funding.--There shall be available to the 
Secretary to carry out this section, from funds not otherwise 
appropriated, such sums as may be necessary to provide loan 
forgiveness in accordance with this section to each eligible 
individual.-

           *       *       *       *       *       *       *


SEC. 435. DEFINITIONS FOR STUDENT LOAN INSURANCE PROGRAM.

  As used in this part:
  (a) * * *

           *       *       *       *       *       *       *

  (o) 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--
                          (i) * * *
                          (ii) an amount equal to [100 percent 
                        of the poverty line for a family of 2] 
                        150 percent of the poverty line 
                        applicable to the borrower's family 
                        size as determined in accordance with 
                        section 673(2) of the Community Service 
                        Block Grant Act; or
                  [(B) such borrower is working full-time and 
                has a Federal educational debt burden that 
                equals or exceeds 20 percent of such borrower's 
                adjusted gross income, and the difference 
                between such borrower's adjusted gross income 
                minus such burden is less than 220 percent of 
                the greater of--
                          [(i) the annual earnings of an 
                        individual earning the minimum wage 
                        under section 6 of the Fair Labor 
                        Standards Act of 1938; or
                          [(ii) the income official poverty 
                        line (as defined by the Office of 
                        Management and Budget, and revised 
                        annually in accordance with section 
                        673(2) of the Community Services Block 
                        Grant Act) applicable to a family of 
                        two; or]
                  [(C)] (B) such borrower meets such other 
                criteria as are established by the Secretary by 
                regulation in accordance with paragraph (2).
          (2) Considerations.--In establishing criteria for 
        purposes of paragraph [(1)(C)] (1)(B), the Secretary 
        shall consider the borrower's income and debt-to-income 
        ratio as primary factors.

           *       *       *       *       *       *       *


SEC. 438. SPECIAL ALLOWANCES.

  (a) * * *
  (b) Computation and Payment.--
          (1) * * *
          (2) Rate of special allowance.--(A) * * *

           *       *       *       *       *       *       *

          (I) Loans disbursed on or after january 1, 2000.--
                  (i) In general.--Notwithstanding 
                subparagraphs (G) and (H), but subject to 
                paragraph (4) and [clauses (ii), (iii), and 
                (iv)] the following clauses of this 
                subparagraph, and except as provided in 
                subparagraph (B), the special allowance paid 
                pursuant to this subsection on loans for which 
                the first disbursement is made on or after 
                January 1, 2000, shall be computed--
                          (I) * * *

           *       *       *       *       *       *       *

                  (ii) In school and grace period.--In the case 
                of any loan--
                          (I) * * *
                          (II) for which the first disbursement 
                        is made on or after July 1, 2006, and 
                        for which the applicable rate of 
                        interest is described in [section 
                        427A(l)(1)] section 427A(l)(1) or 
                        (l)(4), but only with respect to (aa) 
                        periods prior to the beginning of the 
                        repayment period of the loan; or (bb) 
                        during the periods in which principal 
                        need not be paid (whether or not such 
                        principal is in fact paid) by reason of 
                        a provision described in section 
                        427(a)(2)(C) or 428(b)(1)(M);

           *       *       *       *       *       *       *

                  (v) Recapture of excess interest.--
                          (I) * * *

           *       *       *       *       *       *       *

                          (III) Special allowance support 
                        level.--For purposes of this clause, 
                        the term ``special allowance support 
                        level'' means, for any loan, a number 
                        expressed as a percentage equal to the 
                        sum of the rates determined under 
                        subclauses (I) and (III) of clause (i), 
                        and applying any substitution rules 
                        applicable to such loan under [clauses 
                        (ii), (iii), and (iv)] clauses (ii), 
                        (iii), (iv), and (vi) in determining 
                        such sum.-
                  (vi) Reduction for loans on or after october 
                1, 2007.--With respect to a loan on which the 
                applicable interest rate is determined under 
                section 427A(l), the percentage to be added 
                under clause (i)(III) in computing the special 
                allowance payment pursuant to this subparagraph 
                shall be the following:
                                  (I) In general and plus 
                                loans.--1.79 percent in the 
                                case of a loan described in 
                                clause (i) or (iii) for which 
                                the first disbursement of 
                                principal is made on or after 
                                October 1, 2007.
                                  (II) In school and grace 
                                period.--1.19 percent in the 
                                case of a loan described in 
                                clause (ii)(II) for which the 
                                first disbursement of principal 
                                is made on or after October 1, 
                                2007.
                                  (III) Consolidation loans.--
                                2.09 percent in the case of a 
                                loan described in clause (iv) 
                                for which the first 
                                disbursement of principal is 
                                made on or after October 1, 
                                2007.-

           *       *       *       *       *       *       *

          (5) Definition of eligible loan.--As used in this 
        section, the term ``eligible loan'' means a loan--
                  (A) * * *
[As used in this section, the term ``eligible loan'' includes 
all loans subject to section 428I.]

           *       *       *       *       *       *       *

  (d) Loan Fees From Lenders.--
          (1) * * *
          [(2) Amount of loan fees.--With respect to any loan 
        under this part for which the first disbursement 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.]-
          (2) Amount of loan fees.--
                  (A) Amount.--The amount of the loan fee which 
                shall be deducted under paragraph (1), but 
                which may not be collected from the borrower, 
                shall be equal to--
                          (i) except as provided in clauses 
                        (ii) and (iii), 0.50 percent of the 
                        principal amount of the loan with 
                        respect to any loan under this part for 
                        which the first disbursement was made 
                        on or after October 1, 1993;
                          (ii) 1.0 percent of the principal 
                        amount of the loan with respect to any 
                        loan under this part for which the 
                        first disbursement was made on or after 
                        October 1, 2007, that is held by any 
                        holder other than a holder described in 
                        subclause (I) or (II) of clause (iii); 
                        and
                          (iii) 0.0 percent of the principal 
                        amount of the loan with respect to any 
                        loan under this part for which the 
                        first disbursement was made on or after 
                        October 1, 2007, that is held by--
                                  (I) any holder that, together 
                                with its affiliated holders, is 
                                designated by the Secretary as 
                                a small lender under 
                                subparagraph (B); or
                                  (II) any holder that--
                                          (aa) is a unit of 
                                        State or local 
                                        government or a 
                                        nonprofit private 
                                        entity; and
                                          (bb) is not owned in 
                                        whole or in part by, or 
                                        controlled or operated 
                                        by, or otherwise 
                                        affiliated with, a for-
                                        profit entity.
                  (B) Designation of small lenders.--In 
                determining which holders of eligible loans 
                qualify as small lenders for purposes of 
                subparagraph (A)(iii)(I), the Secretary shall, 
                using the most recently available data with 
                respect to the total principal amount of 
                eligible loans held by holders--
                          (i) rank all holders of eligible 
                        loans (combined with their affiliated 
                        holders) in descending order by total 
                        principal amount of eligible loans 
                        held;
                          (ii) calculate the total principal 
                        amount of eligible loans held by all 
                        holders; and
                          (iii) identify the subset of 
                        consecutively ranked holders under 
                        clause (i), starting with the lowest 
                        ranked holder, that together hold a 
                        total principal amount of such loans 
                        equal to 15 percent of the total amount 
                        calculated under clause (ii), but 
                        excluding the holder, if any, whose 
                        holdings when added cause the total 
                        holdings of the subset to equal but not 
                        exceed such 15 percent of such total 
                        amount calculated; and
                          (iv) designate as small lenders any 
                        holder identified as a member of the 
                        subset under clause (iii).-

           *       *       *       *       *       *       *


PART D--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

           *       *       *       *       *       *       *


SEC. 455. TERMS AND CONDITIONS OF LOANS.

  (a) * * *
  (b) Interest Rate.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Interest rate provision for new loans on or after 
        july 1, 2006.--
                  (A) * * *

           *       *       *       *       *       *       *
-
                  (D) Reduced rates for undergraduate fdsl.--
                Notwithstanding the preceding paragraphs of 
                this subsection, for Federal Direct Stafford 
                Loans made to undergraduate students for which 
                the first disbursement is made on or after July 
                1, 2006, and before July 1, 2013, the 
                applicable rate of interest shall be as 
                follows:
                          (i) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2006, and before July 1, 2008, 6.80 
                        percent on the unpaid principal balance 
                        of the loan.
                          (ii) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2008, and before July 1, 2009, 6.12 
                        percent on the unpaid principal balance 
                        of the loan.
                          (iii) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2009, and before July 1, 2010, 5.44 
                        percent on the unpaid principal balance 
                        of the loan.
                          (iv) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2010, and before July 1, 2011, 4.76 
                        percent on the unpaid principal balance 
                        of the loan.
                          (v) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2011, and before July 1, 2012, 4.08 
                        percent on the unpaid principal balance 
                        of the loan.
                          (vi) For a loan for which the first 
                        disbursement is made on or after July 
                        1, 2012, and before July 1, 2013, 3.40 
                        percent on the unpaid principal balance 
                        of the loan.-

           *       *       *       *       *       *       *

  (d) Repayment Plans.--
          (1) Design and selection.--Consistent with criteria 
        established 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, including principal 
        and interest on the loan. The borrower shall be 
        entitled to accelerate, without penalty, repayment on 
        the borrower's loans under this part. The borrower may 
        choose--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) an extended repayment plan, consistent 
                with section [428(b)(9)(A)(v)] 
                428(b)(9)(A)(iv), except that the borrower 
                shall annually repay a minimum amount 
                determined by the Secretary in accordance with 
                section 428(b)(1)(L); and
                  (D) an income contingent repayment plan, with 
                varying 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 made on behalf of a dependent 
                student.

           *       *       *       *       *       *       *

  (e) Income Contingent Repayment.--
          (1) * * *

           *       *       *       *       *       *       *
-
          (7) Repayment plan for public sector employees.--
                  (A) In general.--The Secretary shall forgive 
                the balance due on any loan made under this 
                part or section 428C(b)(5) for a borrower--
                          (i) who has made 120 payments on such 
                        loan pursuant to income-contingent 
                        repayment; and
                          (ii) who is employed, and was 
                        employed for the 10-year period in 
                        which the borrower made the 120 
                        payments described in clause (i), in a 
                        public sector job.
                  (B) Public sector job.--In this paragraph, 
                the term ``public sector job'' means a full-
                time job in emergency management, government, 
                public safety, law enforcement, public health, 
                education (including early childhood 
                education), social work in a public child or 
                family service agency, or public interest legal 
                services (including prosecution or public 
                defense).
          (8) Return to standard repayment.--A borrower who is 
        repaying a loan made under this part pursuant to 
        income-contingent repayment may choose, at any time, to 
        terminate repayment pursuant to income-contingent 
        repayment and repay such loan under the standard 
        repayment plan.
          (9) Maximum repayment period.--In calculating the 
        extended period of time for which an income-contingent 
        repayment plan under this subsection may be in effect 
        for a borrower, the Secretary shall include all time 
        periods during which a borrower of loans under part B, 
        part D, or part E--
                  (A) is not in default on any loan that is 
                included in the income-contingent repayment 
                plan; and
                  (B)(i) is in deferment due to an economic 
                hardship described in section 435(o);
          (ii) makes monthly payments under paragraph (1) or 
        (6) of section 493C(b); or
          (iii) makes payments under a standard repayment plan 
        described in section 428(b)(9)(A)(i) or subsection 
        (d)(1)(A).-
  (f) Deferment.--
          (1) * * *
          (2) Eligibility.--A borrower of a loan made under 
        this part shall be eligible for a deferment during any 
        period--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) [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.

           *       *       *       *       *       *       *


SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

  (a) * * *
  (b) Calculation Basis.--[Account]
          (1) For fiscal years 2006 and 2007.--For fiscal years 
        2006 and 2007, account maintenance fees payable to 
        guaranty agencies under subsection (a)(3) shall be 
        calculated on the basis of 0.10 percent of the original 
        principal amount of outstanding loans on which 
        insurance was issued under part B.-
          (2) For fiscal year 2008 and succeeding fiscal 
        years.--
                  (A) Unit cost basis.--For fiscal year 2008 
                and each succeeding fiscal year, the Secretary 
                shall calculate the account maintenance fees 
                payable to guaranty agencies under subsection 
                (a)(3), on a per-loan cost basis in accordance 
                with subparagraph (B) of this paragraph.
                  (B) Determinations.--To determine the amount 
                that shall be paid under subsection (a)(3) per 
                outstanding loan guaranteed by a guaranty 
                agency for fiscal year 2008 and succeeding 
                fiscal years, the Secretary shall--
                          (i) establish the per-loan cost basis 
                        amount by--
                                  (I) dividing the total amount 
                                of account maintenance fees 
                                paid under subsection (a)(3) in 
                                fiscal year 2006, by
                                  (II) the number of loans 
                                under part B that were 
                                outstanding in that fiscal 
                                year; and
                          (ii) determine on October 1 of fiscal 
                        year 2008 and each subsequent fiscal 
                        year, and pay to each guaranty agency, 
                        an amount equal to the product of the 
                        number of loans under part B that are 
                        outstanding on October 1 of that fiscal 
                        year and insured by that guaranty 
                        agency, multiplied by--
                                  (I) the amount determined 
                                under clause (i); increased by
                                  (II) a percentage equal to 
                                the percentage increase in the 
                                GDP price index (as determined 
                                by the Bureau of Labor 
                                Statistics of the Department of 
                                Labor) between the calendar 
                                quarter ending on June 30, 
                                2006, and the calendar quarter 
                                ending on the June 30 preceding 
                                such October 1 of such fiscal 
                                year.-

           *       *       *       *       *       *       *


                     Part E--Federal Perkins Loans

SEC. 461. APPROPRIATIONS AUTHORIZED.

  (a) * * *
  (b) Authorization of Appropriations.--(1) * * *

           *       *       *       *       *       *       *
-
  (3) In addition to any amounts appropriated pursuant to 
paragraph (1) or (2) of this subsection, there shall be 
available to the Secretary for contributions to student loan 
funds established under part E, from funds not otherwise 
appropriated, $100,000,000 for each of the fiscal years 2008 
through 2012. The sum of the amount made available under this 
subsection for any such fiscal year, plus the amount so 
appropriated for such fiscal year, shall, for purposes of 
allocations under section 462, be treated as the amount 
appropriated pursuant to section 461(b) for such fiscal year.
  (4) The authority to make contributions to student loan funds 
under this part shall expire at the end of fiscal year 2012.-

           *       *       *       *       *       *       *


SEC. 464. TERMS OF LOANS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Contents of Loan Agreement.--(1) * * *
  (2)(A) 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) * * *

           *       *       *       *       *       *       *

  (iv) [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; or

           *       *       *       *       *       *       *


PART F--NEED ANALYSIS

           *       *       *       *       *       *       *


SEC. 475. FAMILY CONTRIBUTION FOR DEPENDENT STUDENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Student Contribution From Available Income.--
          (1) * * *
          (2) Adjustment to student income.--The adjustment to 
        student income is equal to the sum of--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) an income protection allowance of $2,200 
                (or a successor amount prescribed by the 
                Secretary under section 478);]-
                  (D) an income protection allowance of the 
                following amount (or a successor amount 
                prescribed by the Secretary under section 
                478)--
                          (i) for the 2009--2010 academic year, 
                        $3,750;
                          (ii) for the 2010--2011 academic 
                        year, $4,500;
                          (iii) for the 2011--2012 academic 
                        year, $5,250; and
                          (iv) for the 2012--2013 academic 
                        year, $6,000;-

           *       *       *       *       *       *       *


SEC. 476. FAMILY CONTRIBUTION FOR INDEPENDENT STUDENTS WITHOUT 
                    DEPENDENTS OTHER THAN A SPOUSE.

  (a) * * *
  (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) * * *

           *       *       *       *       *       *       *

                          [(iv) an income protection allowance 
                        of the following amount (or a successor 
                        amount prescribed by the Secretary 
                        under section 478)--
                                  [(I) $5,000 for single 
                                students;
                                  [(II) $5,000 for married 
                                students where both are 
                                enrolled pursuant to subsection 
                                (a)(2); and
                                  [(III) $8,000 for married 
                                students where one is enrolled 
                                pursuant to subsection 
                                (a)(2);]-
                          (iv) an income protection allowance 
                        of the following amount (or a successor 
                        amount prescribed by the Secretary 
                        under section 478)--
                                  (I) for single or separated 
                                students, or married students 
                                where both are enrolled 
                                pursuant to subsection (a)(2)--
                                          (aa) for the 2009--
                                        2010 academic year, 
                                        $6,690;
                                          (bb) for the 2010--
                                        2011 academic year, 
                                        $7,160;
                                          (cc) for the 2011--
                                        2012 academic year, 
                                        $7,630; and
                                          (dd) for the 2012--
                                        2013 academic year, 
                                        $8,090; and
                                  (II) for married students 
                                where 1 is enrolled pursuant to 
                                subsection (a)(2)--
                                          (aa) for the 2009--
                                        2010 academic year, 
                                        $10,720;
                                          (bb) for the 2010--
                                        2011 academic year, 
                                        $11,470;
                                          (cc) for the 2011--
                                        2012 academic year, 
                                        $12,220; and
                                          (dd) for the 2012--
                                        2013 academic year, 
                                        $12,960;-

           *       *       *       *       *       *       *


SEC. 478. REGULATIONS; UPDATED TABLES.

  (a) * * *
  (b) Income Protection Allowance.--
          (1) Revised tables.--
                  (A) In general.--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 contained 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 
                December next preceding the beginning of such 
                academic year, and rounding the result to the 
                nearest $10. [For the 2007-2008]
                  (B) Special rule for 2007-2008 academic 
                year.--For the 2007-2008 academic year, the 
                Secretary shall revise the tables in accordance 
                with this paragraph, except that the Secretary 
                shall increase the amounts contained in the 
                table in section 477(b)(4) by a percentage 
                equal to the greater of the estimated 
                percentage increase in the Consumer Price Index 
                (as determined under the [preceding sentence] 
                subparagraph (A)) or 5 percent.-
                  (C) Special rule for 2009--2010 through 
                2012--2013 academic years.--For the 2009--2010 
                academic year, and for each of the 3 succeeding 
                academic years, the Secretary shall revise the 
                tables in accordance with this paragraph, 
                except that, for the table in section 
                477(b)(4), the Secretary shall revise such 
                table by increasing the amounts contained in 
                such table for the preceding academic year by 
                10 percent.-
          (2) Revised amounts.--For each academic year after 
        academic year 2007-2008, the Secretary shall publish in 
        the Federal Register revised income protection 
        allowances for the purpose of sections 475(g)(2)(D) and 
        476(b)(1)(A)(iv). Such revised allowances [shall be 
        developed by increasing each of the dollar amounts 
        contained in such section by a percentage equal to the 
        estimated percentage increase in the Consumer Price 
        Index (as determined by the Secretary) between December 
        2006 and the December next preceding the beginning of 
        such academic year, and rounding the result to the 
        nearest $10.] shall be developed--
                  (A) for academic year 2008-2009, by 
                increasing each of the dollar amounts contained 
                in such section as such section was in effect 
                on the day before the date of enactment of the 
                College Cost Reduction Act of 2007 by a 
                percentage equal to the estimated percentage 
                increase in the Consumer Price Index (as 
                defined in section 478(f)) between December 
                2006 and the December next preceding the 
                beginning of such academic year, and rounding 
                the result to the nearest $10; and
                  (B) for each academic year after 2012-2013, 
                by increasing each of the dollar amounts 
                contained in such section for academic year 
                2012-2013 by a percentage equal to the 
                estimated percentage increase in the Consumer 
                Price Index (as defined in section 478(f)) 
                between December 2011 and the December next 
                preceding the beginning of such academic year, 
                and rounding the result to the nearest $10.

           *       *       *       *       *       *       *


SEC. 479. SIMPLIFIED NEEDS TESTS.

  (a) * * *
  (b) Simplified Needs Test.--
          (1) Eligibility.--An applicant is eligible to file a 
        simplified 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--
                                  (I) * * *
                                  (II) certify that the parents 
                                are not required to file a 
                                Federal income tax return; 
                                [or]-
                                  (III) 1 of whom is a 
                                dislocated worker; or-
                                  [(III)] (IV) received, or the 
                                student received, benefits at 
                                some time during the previous 
                                [12-month] 24-month period 
                                under a means-tested Federal 
                                benefit program as defined 
                                under subsection (d); and

           *       *       *       *       *       *       *

                  (B) in the case of an applicant who is an 
                independent student--
                          (i) the student (and the student's 
                        spouse, if any)--
                                  (I) * * *
                                  (II) certifies that the 
                                student (and the student's 
                                spouse, if any) is not required 
                                to file a Federal income tax 
                                return; [or]-
                                  (III) 1 of whom is a 
                                dislocated worker; or-
                                  [(III)] (IV) received 
                                benefits at some time during 
                                the previous [12-month] 24-
                                month period under a means-
                                tested Federal benefit program 
                                as defined under subsection 
                                (d); and

           *       *       *       *       *       *       *

  (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--
                          (i) file, or are eligible to file, a 
                        form described in subsection (b)(3);
                          (ii) certify that the parents are not 
                        required to file a Federal income tax 
                        return; [or]-
                          (iii) 1 of whom is a dislocated 
                        worker; or-
                          [(iii)] (iv) received, or the student 
                        received, benefits at some time during 
                        the previous [12-month] 24-month period 
                        under a means-tested Federal benefit 
                        program as defined under subsection 
                        (d); and
                  (B) the sum of the adjusted gross income of 
                the parents is less than or equal to [$20,000] 
                $30,000; 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)--
                          (i) files, or is eligible to file, a 
                        form described in subsection (b)(3);
                          (ii) certifies that the student (and 
                        the student's spouse, if any) is not 
                        required to file a Federal income tax 
                        return; [or]-
                          (iii) is a dislocated worker; or-
                          [(iii)] (iv) received benefits at 
                        some time during the previous [12-
                        month] 24-month period under a means-
                        tested Federal benefit program as 
                        defined under subsection (d); and
                  (B) the sum of the adjusted gross income of 
                the student and spouse (if appropriate) is less 
                than or equal to [$20,000] $30,000.
An individual is not required to qualify or file for the earned 
income credit in order to be eligible under this subsection. 
The Secretary shall annually adjust the income level necessary 
to qualify an applicant for the zero expected family 
contribution. The income level shall be adjusted according to 
increases in the Consumer Price Index, as defined in section 
478(f).
  [(d) Definition of Means-Tested Federal Benefit Program.--In 
this section, the term]
  (d) Definitions.--In this section:
          (1) Dislocated worker.--The term ``dislocated 
        worker'' has the meaning given the term in section 101 
        of the Workforce Investment Act of 1998 (29 U.S.C. 
        2801).
          (2) Means-tested federal benefit program.--The term 
        ``means-tested Federal benefit program'' means a 
        mandatory spending program of the Federal Government, 
        other than a program under this title, in which 
        eligibility for the program's benefits, or the amount 
        of such benefits, are determined on the basis of income 
        or resources of the individual or family seeking the 
        benefit, and may include such programs as--
                  [(1)] (A) the supplemental security income 
                program under title XVI of the Social Security 
                Act (42 U.S.C. 1381 et seq.);
                  [(2)] (B) the food stamp program under the 
                Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.);
                  [(3)] (C) the free and reduced price school 
                lunch program established under the Richard B. 
                Russell National School Lunch Act (42 U.S.C. 
                1751 et seq.);
                  [(4)] (D) the program of block grants for 
                States for temporary assistance for needy 
                families established under part A of title IV 
                of the Social Security Act (42 U.S.C. 601 et 
                seq.);
                  [(5)] (E) the special supplemental nutrition 
                program for women, infants, and children 
                established by section 17 of the Child 
                Nutrition Act of 1966 (42 U.S.C. 1786); and
                  [(6)] (F) other programs identified by the 
                Secretary.

SEC. 479A. DISCRETION OF STUDENT FINANCIAL AID ADMINISTRATORS.

  (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 contribution (or both) to allow for treatment of an 
individual eligible applicant with special circumstances. 
However, this authority shall not be construed to permit aid 
administrators to deviate from the contributions expected in 
the absence of special circumstances. Special circumstances may 
include tuition expenses at an elementary or secondary school, 
medical or dental expenses not covered by insurance, unusually 
high child care costs, recent unemployment of a family member, 
a family member who is a dislocated worker (as defined in 
section 101 of the Workforce Investment Act of 1998 (29 U.S.C. 
2801)), the number of parents enrolled at least half-time in a 
degree, certificate, or other program leading to a recognized 
educational credential at an institution with a program 
participation agreement under section 487, or other changes in 
a family's income, a family's assets, or a student's status. 
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 adjustments 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.

           *       *       *       *       *       *       *


SEC. 480. DEFINITIONS.

  As used in this part:
  (a) Total Income.--(1) * * *
  (2) No portion of any student financial assistance received 
from any program by an individual, 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.), [and no portion] 
no portion of any tax credit taken under section 25A of the 
Internal Revenue Code of 1986, and no distribution from any 
qualified education benefit described in subsection (f)(3) that 
is not subject to Federal income tax, 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 income 
and benefits'' means--
          [(1) child support received;
          [(2) welfare benefits, including assistance under a 
        State program funded 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 others (including cash payments and cash 
        value of benefits);
          [(7) cash support or any money paid on the student's 
        behalf, except, for dependent students, funds provided 
        by the student'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;
          [(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 purposes; and
          [(14) any other untaxed income and benefits, such as 
        Black Lung Benefits, Refugee Assistance, railroad 
        retirement benefits, or Job Training Partnership Act 
        noneducational benefits or benefits received through 
        participation in employment and training activities 
        under title I of the Workforce Investment Act of 
        1998.]-
  (b) Untaxed Income and Benefits.--
          (1) The term ``untaxed income and benefits'' means--
                  (A) child support received;
                  (B) workman's compensation;
                  (C) veteran's benefits such as death pension, 
                dependency, and indemnity compensation, but 
                excluding veterans' education benefits as 
                defined in subsection (c);
                  (D) interest on tax-free bonds;
                  (E) housing, food, and other allowances 
                (excluding rent subsidies for low-income 
                housing) for military, clergy, and others 
                (including cash payments and cash value of 
                benefits);
                  (F) cash support or any money paid on the 
                student``s behalf, except, for dependent 
                students, funds provided by the student''s 
                parents;
                  (G) untaxed portion of pensions;
                  (H) payments to individual retirement 
                accounts and Keogh accounts excluded from 
                income for Federal income tax purposes; and
                  (I) any other untaxed income and benefits, 
                such as Black Lung Benefits, Refugee 
                Assistance, railroad retirement benefits, or 
                Job Training Partnership Act noneducational 
                benefits or benefits received through 
                participation in employment and training 
                activities under title I of the Workforce 
                Investment Act of 1998 (29 U.S.C. 2801 et 
                seq.).
          (2) The term ``untaxed income and benefits'' shall 
        not include the amount of additional child tax credit 
        claimed for Federal income tax purposes.-

           *       *       *       *       *       *       *

  (f) Assets.--(1) * * *

           *       *       *       *       *       *       *

  (3) A qualified education benefit [shall not be considered an 
asset of a student for purposes of section 475] shall be 
considered an asset of the parent for purposes of section 475.-
  (4) A qualified education benefit shall be considered an 
asset of the student for purposes of section 476 and 477.-
  [(4)] (5) In determining the value of assets in a 
determination of need under this title (other than for subpart 
4 of part A), the value of a qualified education benefit shall 
be--
          (A) * * *

           *       *       *       *       *       *       *

  [(5)] (6) In this subsection:
          (A) * * *

           *       *       *       *       *       *       *

  (j) Other Financial Assistance.--(1) * * *
  (2) Notwithstanding paragraph (1), a tax credit taken under 
section 25A of the Internal Revenue Code of 1986, or a 
distribution that is not includable in gross income under 
section 529 of such Code, under another prepaid tuition plan 
offered by a State, or under a Coverdell education savings 
account under section 530 of such Code, shall not be treated as 
estimated financial assistance for purposes of section 471(3).

           *       *       *       *       *       *       *


Part G--General Provisions Relating to Student Assistance Programs

           *       *       *       *       *       *       *
                                   -

SEC. 484C. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.

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

           *       *       *       *       *       *       *


SEC. 493C. INCOME-BASED REPAYMENT.

  (a) Definitions.--In this section:
          (1) Excepted plus loan.--The term ``excepted PLUS 
        loan'' means a loan under section 428B, or a Federal 
        Direct PLUS Loan, that is made, insured, or guaranteed 
        on behalf of a dependent student.
          (2) Partial financial hardship.--The term ``partial 
        financial hardship'', when used with respect to a 
        borrower, means that for such borrower--
                  (A) the annual amount due on the total amount 
                of loans made, insured, or guaranteed under 
                part B or D (other than an excepted PLUS loan) 
                to a borrower as calculated under the standard 
                repayment plan under section 428(b)(9)(A)(i) or 
                455(d)(1)(A); exceeds
                  (B) 15 percent of the result obtained by 
                calculating the amount by which--
                          (i) the borrower's, and the 
                        borrower's spouse's (if applicable), 
                        adjusted gross income; exceeds
                          (ii) 150 percent of the poverty line 
                        applicable to the borrower's family 
                        size as determined under section 673(2) 
                        of the Community Services Block Grant 
                        Act (42 U.S.C. 9902(2)).
  (b) Income-Based Repayment Program Authorized.--
Notwithstanding any other provision of this Act, the Secretary 
shall carry out a program under which--
          (1) a borrower of any loan made, insured, or 
        guaranteed under part B or D (other than an excepted 
        PLUS loan) who has a partial financial hardship may 
        elect, during any period the borrower has the partial 
        financial hardship, to have the borrower's aggregate 
        monthly payment for all such loans not exceed the 
        result described in subsection (a)(2)(B) divided by 12;
          (2) the holder of such a loan shall apply the 
        borrower's monthly payment under this subsection first 
        toward interest due on the loan and then toward the 
        principal of the loan;
          (3) any interest due and not paid under paragraph (2) 
        shall be capitalized;
          (4) any principal due and not paid under paragraph 
        (2) shall be deferred;
          (5) the amount of time the borrower makes monthly 
        payments under paragraph (1) may exceed 10 years;
          (6) if the borrower no longer has a partial financial 
        hardship or no longer wishes to continue the election 
        under this subsection, then--
                  (A) the maximum monthly payment required to 
                be paid for all loans made to the borrower 
                under part B or D (other than an excepted PLUS 
                loan) shall not exceed the monthly amount 
                calculated under section 428(b)(9)(A)(i) or 
                455(d)(1)(A) when the borrower first made the 
                election described in this subsection; and
                  (B) the amount of time the borrower is 
                permitted to repay such loans may exceed 10 
                years;
          (7) the Secretary shall repay or cancel any 
        outstanding balance of principal and interest due on 
        all loans made under part B or D (other than a loan 
        under section 428B or a Federal Direct PLUS Loan) to a 
        borrower who--
                  (A) is in deferment due to an economic 
                hardship described in section 435(o) for a 
                period of time prescribed by the Secretary, not 
                to exceed 20 years; or
                  (B)(i) makes the election to participate in 
                income-based repayment under paragraph (1); and
                  (ii) for a period of time prescribed by the 
                Secretary, not to exceed 20 years (including 
                any period during which the borrower is in 
                deferment due to an economic hardship described 
                in section 435(o)), meets 1 or more of the 
                following requirements:
                          (I) has made reduced monthly payments 
                        under paragraph (1);
                          (II) has made monthly payments of not 
                        less than the monthly amount calculated 
                        under section 428(b)(9)(A)(i) or 
                        455(d)(1)(A) when the borrower first 
                        made the election described in this 
                        subsection;
                          (III) has made payments under a 
                        standard repayment plan under section 
                        428(b)(9)(A)(i) or 455(d)(1)(A);
                          (IV) has made payments under an 
                        income-contingent repayment plan under 
                        section 455(d)(1)(D); and
          (8) a borrower who is repaying a loan made under this 
        part pursuant to income-based repayment may elect, at 
        any time, to terminate repayment pursuant to income-
        based repayment and repay such loan under the standard 
        repayment plan.-

           *       *       *       *       *       *       *
-

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

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

  (a) Eligible Institution.--An institution of higher education 
is eligible to receive funds from the amounts made available 
under this section if such institution is--
          (1) a part B institution (as defined in section 322 
        (20 U.S.C. 1061));
          (2) a Hispanic-serving institution (as defined in 
        section 502 (20 U.S.C. 1101a));
          (3) a Tribal College or University (as defined in 
        section 316 (20 U.S.C. 1059c));
          (4) an Alaska Native-serving institution or a Native 
        Hawaiian-serving institution (as defined in section 
        317(b) (20 U.S.C. 1059d(b)));
          (5) a Predominantly Black Institution (as defined in 
        subsection (c)); or
          (6) an Asian and Pacific Islander-serving institution 
        (as defined in subsection (c)).
  (b) New Investment of Funds.--
          (1) In general.--There shall be available to the 
        Secretary to carry out this section, from funds not 
        otherwise appropriated, $100,000,000 for each of the 
        fiscal years 2008 through 2012. The authority to carry 
        out this section shall expire at the end of fiscal year 
        2012.
          (2) Allocation and allotment.--
                  (A) In general.--Of the amounts made 
                available under paragraph (1) for any fiscal 
                year--
                          (i) 40 percent shall be available for 
                        allocation under subparagraph (B);
                          (ii) 40 percent shall be available 
                        for allocation under subparagraph (C); 
                        and
                          (iii) 20 percent shall be available 
                        for allocation under subparagraph (D).
                  (B) Hsi stem and articulation programs.--The 
                amount made available for allocation under this 
                subparagraph by subparagraph (A)(i) for any 
                fiscal year shall be available for Hispanic-
                serving Institutions for activities described 
                in section 503, with a priority given to 
                applications that propose--
                          (i) to increase the number of 
                        Hispanic and other low income students 
                        attaining degrees in the fields of 
                        science, technology, engineering and 
                        mathematics; and
                          (ii) to develop model transfer and 
                        articulation agreements between 2-year 
                        Hispanic-serving institutions and 4-
                        year institutions in such fields.
                  (C) Allocation and allotment hbcus and 
                pbis.--From the amount made available for 
                allocation under this subparagraph by 
                subparagraph (A)(ii) for any fiscal year--
                          (i) $34,000,000 shall be available to 
                        eligible institutions described in 
                        subsection (a)(1) and shall be made 
                        available as grants under section 323 
                        and allotted among such institutions 
                        under section 324, treating such 
                        amount, plus the amount appropriated 
                        for such fiscal year in a regular or 
                        supplemental appropriation Act to carry 
                        out part B of title III, as the amount 
                        appropriated to carry out part B of 
                        title III for purposes of allotments 
                        under section 324, for use by such 
                        institutions with a priority for--
                                  (I) activities described in 
                                paragraphs (1), (2), (4), (5), 
                                and (10) of section 323(a); and
                                  (II) other activities, 
                                consistent with the 
                                institution's comprehensive 
                                plan and designed to increase 
                                the institution's capacity to 
                                prepare students for careers in 
                                the physical and natural 
                                sciences, mathematics, computer 
                                science and information 
                                technology and sciences, 
                                engineering, language 
                                instruction in the less-
                                commonly taught languages and 
                                international affairs, and 
                                nursing and allied health 
                                professions; and
                          (ii) $6,000,000 shall be available to 
                        eligible institutions described in 
                        subsection (a)(5) and shall be 
                        available for a competitive grant 
                        program to award 10 grants of $600,000 
                        annually for programs in the following 
                        areas: science, technology, 
                        engineering, or mathematics (STEM); 
                        health education; internationalization 
                        or globalization; teacher preparation; 
                        or improving educational outcomes of 
                        African American males.
                  (D) Allocation and allotment to other 
                minority-serving institutions.--From the amount 
                made available for allocation under this 
                subparagraph by subparagraph (A)(iii) for any 
                fiscal year (in this subparagraph referred to 
                as the ``allocable amount'')--
                          (i) 60 percent of the allocable 
                        amount for such fiscal year shall be 
                        available to eligible institutions 
                        described in subsection (a)(3) and 
                        shall be made available as grants under 
                        section 316, treating such 60 percent 
                        of the allocable amount as part of the 
                        amount appropriated for such fiscal 
                        year in a regular or supplemental 
                        appropriation Act to carry out such 
                        section, and using such 60 percent for 
                        purposes described in subsection (c) of 
                        such section;
                          (ii) 30 percent of the allocable 
                        amount for such fiscal year shall be 
                        available to eligible institutions 
                        described in subsection (a)(4) and 
                        shall be made available as grants under 
                        section 317, treating such 30 percent 
                        of the allocable amount as part of the 
                        amount appropriated for such fiscal 
                        year in a regular or supplemental 
                        appropriation Act to carry out such 
                        section and using such 60 percent for 
                        purposes described in subsection (a) of 
                        such section; and
                          (iii) 10 percent of the allocable 
                        amount for such fiscal year shall be 
                        available to eligible institutions 
                        described in subsection (a)(6) for 
                        activities described in section 311(c).
  (c) Definitions.--
          (1) Predominantly black institution.--The term 
        ``Predominantly Black institution'' means an 
        institution of higher education that--
                  (A) has an enrollment of needy undergraduate 
                students as required and defined by paragraph 
                (2);
                  (B) has an average educational and general 
                expenditure which is low, per full-time 
                equivalent undergraduate student in comparison 
                with the average educational and general 
                expenditure per full-time equivalent 
                undergraduate student of institutions that 
                offer similar instruction, except that the 
                Secretary may apply the waiver requirements 
                described in section 392(b) to this 
                subparagraph in the same manner as the 
                Secretary applies the waiver requirements to 
                section 312(b)(1)(B);
                  (C) has an enrollment of undergraduate 
                students--
                          (i) that is at least 40 percent Black 
                        American students;
                          (ii) that is at least 1,000 
                        undergraduate students;
                          (iii) of which not less than 50 
                        percent of the undergraduate students 
                        enrolled at the institution are low-
                        income individuals or first-generation 
                        college students (as that term is 
                        defined in section 402A(g)); and
                          (iv) of which not less than 50 
                        percent of the undergraduate students 
                        are enrolled in an educational program 
                        leading to a bachelor's or associate's 
                        degree that the institution is licensed 
                        to award by the State in which it is 
                        located;
                  (D) is legally authorized to provide, and 
                provides within the State, an educational 
                program for which the institution of higher 
                education awards a bachelors degree, or in the 
                case of a junior or community college, an 
                associate's degree;
                  (E) is accredited by a nationally recognized 
                accrediting agency or association determined by 
                the Secretary to be a reliable authority as to 
                the quality of training offered, or is, 
                according to such an agency or association, 
                making reasonable progress toward 
                accreditation; and
                  (F) is not receiving assistance under part B 
                of title III.
          (2) Enrollment of needy students.--The term 
        ``enrollment of needy students'' means the enrollment 
        at an eligible institution with respect to which not 
        less than 50 percent of the undergraduate students 
        enrolled in an academic program leading to a degree--
                  (A) in the second fiscal year preceding the 
                fiscal year for which the determination is 
                made, were Federal Pell Grant recipients for 
                such year;
                  (B) come from families that receive benefits 
                under a means-tested Federal benefits program 
                (as defined in paragraph (4));
                  (C) attended a public or nonprofit private 
                secondary school--
                          (i) that is in the school district of 
                        a local educational agency that was 
                        eligible for assistance under part A of 
                        title I of the Elementary and Secondary 
                        Education Act of 1965 for any year 
                        during which the student attended such 
                        secondary school; and
                          (ii) which for the purpose of this 
                        paragraph and for that year was 
                        determined by the Secretary (pursuant 
                        to regulations and after consultation 
                        with the State educational agency of 
                        the State in which the school is 
                        located) to be a school in which the 
                        enrollment of children counted under 
                        section 1113(a)(5) of such Act exceeds 
                        30 percent of the total enrollment of 
                        such school; or
                  (D) are first-generation college students (as 
                that term is defined in section 402A(g)), and a 
                majority of such first-generation college 
                students are low-income individuals.
          (3) Low-income individual.--The term ``low-income 
        individual'' has the meaning given such term in section 
        402A(g).
          (4) Means-tested federal benefit program.--The term 
        ``means-tested Federal benefit program'' means a 
        program of the Federal Government, other than a program 
        under title IV, in which eligibility for the programs' 
        benefits, or the amount of such benefits, or both, are 
        determined on the basis of income or resources of the 
        individual or family seeking the benefit.
          (5) Asian american and pacific islander-serving 
        institution.--The term ``Asian American and Pacific 
        Islander-serving institution'' means an institution of 
        higher education that--
                  (A) is an eligible institution under section 
                312(b); and
                  (B) at the time of application, has an 
                enrollment of undergraduate students that is at 
                least 10 percent Asian American and Pacific 
                Islander students from subgroups with low 
                levels of college degree attainment.
          (6) Asian american.--The term ``Asian American'' has 
        the meaning given the term ``Asian'' in the Office of 
        Management and Budget's Standards for Maintaining, 
        Collecting, and Presenting Federal Data on Race and 
        Ethnicity as published on October 30, 1997 (62 Fed. 
        Reg. 58789).
          (7) Pacific islander.--The term ``Pacific Islander'' 
        has the meaning given the term ``Native Hawaiian'' or 
        ``Other Pacific Islander'' in such Standards for 
        Maintaining, Collecting, and Presenting Federal Data on 
        Race and Ethnicity.
          (8) Low levels of college degree attainment.--The 
        term ``low levels of college degree attainment'' mean 
        college degree attainment that is less than 20 percent 
        for adults ages 25 through 29 as reported by the 
        National Center for Educational Statistics.
  (d) Termination of Authority.--The authority to carry out 
this section expires at the end of fiscal year 2012.-

           *       *       *       *       *       *       *
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    TITLE VIII--COOPERATIVE EDUCATION REWARDS FOR INSTITUTIONS THAT 
                       RESTRAIN TUITION INCREASES

SEC. 801. DEFINITION OF COOPERATIVE EDUCATION.

  For the purpose of this title the term ``cooperative 
education'' means the provision of alternating or parallel 
periods of academic study and public or private employment in 
order to give students work experiences related to their 
academic or occupational objectives and an opportunity to earn 
the funds necessary for continuing and completing their 
education.

SEC. 802. AUTHORIZATION OF APPROPRIATIONS; RESERVATIONS.

  (a) Appropriations.--There shall be available to the 
Secretary to carry out this title from funds not otherwise 
appropriated $15,000,000 for each of the fiscal years 2008 
through 2012.
  (b) Reservations.--Of the amount appropriated for each such 
fiscal year--
          (1) not less than 50 percent shall be available for 
        carrying out grants to institutions of higher education 
        and combinations of such institutions described in 
        section 803(a)(1)(A) for cooperative education under 
        section 803;
          (2) not less than 25 percent shall be available for 
        carrying out grants to institutions of higher education 
        described in section 803(a)(1)(B) for cooperative 
        education under section 803;
          (3) not more than 11 percent shall be available for 
        demonstration projects under paragraph (1) of section 
        804(a);
          (4) not more than 11 percent shall be available for 
        training and resource centers under paragraph (2) of 
        section 804(a); and
          (5) not more than 3 percent shall be available for 
        research under paragraph (3) of section 804(a).
  (c) Availability of Appropriations.--Appropriations under 
this title shall not be available for the payment of 
compensation of students for employment by employers under 
arrangements pursuant to this title.
  (d) Sunset.--The authority to carry out this title shall 
expire at the end of fiscal year 2012.

SEC. 803. GRANTS FOR COOPERATIVE EDUCATION.

  (a) Grants Authorized.--
          (1) In general.--The Secretary is authorized--
                  (A) from the amount available under section 
                802(b)(1) in each fiscal year and in accordance 
                with the provisions of this title, to make 
                grants to institutions of higher education or 
                combinations of such institutions that have not 
                previously received a grant under this 
                paragraph to pay the Federal share of the cost 
                of planning, establishing, expanding, or 
                carrying out programs of cooperative education 
                by such institutions or combinations of 
                institutions; and
                  (B) from the amount available under section 
                802(b)(2) in each fiscal year and in accordance 
                with the provisions of this title, to make 
                grants to institutions of higher education that 
                are operating an existing cooperative education 
                program (as determined by the Secretary) to pay 
                the cost of planning, establishing, expanding, 
                or carrying out programs of cooperative 
                education by such institutions.
          (2) Program requirement.--Cooperative education 
        programs assisted under this section shall provide 
        alternating or parallel periods of academic study and 
        of public or private employment, giving students work 
        experience related to their academic or occupational 
        objectives and the opportunity to earn the funds 
        necessary for continuing and completing their 
        education.
          (3) Amount of grants.--
                  (A) The amount of each grant awarded pursuant 
                to paragraph (1)(A) to any institution of 
                higher education or combination of such 
                institutions in any fiscal year shall not 
                exceed $500,000.
                  (B)(i) Except as provided in clauses (ii) and 
                (iii), the Secretary shall award grants in each 
                fiscal year to each institution of higher 
                education described in paragraph (1)(B) that 
                has an application approved under subsection 
                (b) in an amount which bears the same ratio to 
                the amount reserved pursuant to section 
                802(b)(2) for such fiscal year as the number of 
                unduplicated students placed in cooperative 
                education jobs during the preceding fiscal year 
                (other than cooperative education jobs under 
                section 804 and as determined by the Secretary) 
                by such institution of higher education bears 
                to the total number of all such students placed 
                in such jobs during the preceding fiscal year 
                by all such institutions.
          (ii) No institution of higher education shall receive 
        a grant pursuant to paragraph (1)(B) in any fiscal year 
        in an amount which exceeds 25 percent of such 
        institution's cooperative education program's personnel 
        and operating budget for the preceding fiscal year.
          (iii) The minimum annual grant amount which an 
        institution of higher education is eligible to receive 
        under paragraph (1)(B) is $1,000 and the maximum annual 
        grant amount is $75,000.
          (4) Limitation.--The Secretary shall not award grants 
        pursuant to paragraphs (1)(A) and (1)(B) to the same 
        institution of higher education or combination of such 
        institution in any one fiscal year.
          (5) Uses.--Grants under paragraph (1)(B) shall be 
        used exclusively--
                  (A) to expand the quality and participation 
                of a cooperative education program;
                  (B) for outreach in new curricular areas; and
                  (C) for outreach to potential participants 
                including underrepresented and nontraditional 
                populations.
  (b) Applications.--Each institution of higher education or 
combination of such institutions desiring to receive a grant 
under this section shall submit an application to the Secretary 
at such time and in such manner as the Secretary shall 
prescribe. Each such application shall--
          (1) set forth the program or activities for which a 
        grant is authorized under this section;
          (2) specify each portion of such program or 
        activities which will be performed by a nonprofit 
        organization or institution other than the applicant, 
        and the compensation to be paid for such performance;
          (3) provide that the applicant will expend during 
        such fiscal year for the purpose of such program or 
        activities not less than the amount expended for such 
        purpose during the previous fiscal year;
          (4) describe the plans which the applicant will carry 
        out to assure, and contain a formal statement of the 
        institution's commitment which assures, that the 
        applicant will continue the cooperative education 
        program beyond the 5-year period of Federal assistance 
        described in subsection (c)(1) at a level which is not 
        less than the total amount expended for such program 
        during the first year such program was assisted under 
        this section;
          (5) provide that, in the case of an institution of 
        higher education that provides a 2-year program which 
        is acceptable for full credit toward a bachelor's 
        degree, the cooperative education program will be 
        available to students who are certificate or associate 
        degree candidates and who carry at least one-half the 
        normal full-time academic workload;
          (6) provide that the applicant will--
                  (A) for each fiscal year for which the 
                applicant receives a grant, make such reports 
                with respect to the impact of the cooperative 
                education program in the previous fiscal year 
                as may be essential to ensure that the 
                applicant is complying with the provisions of 
                this section, including--
                          (i) the number of unduplicated 
                        student applicants in the cooperative 
                        education program;
                          (ii) the number of unduplicated 
                        students placed in cooperative 
                        education jobs;
                          (iii) the number of employers who 
                        have hired cooperative education 
                        students;
                          (iv) the average income for students 
                        derived from working in cooperative 
                        education jobs; and
                          (v) the increase or decrease in the 
                        number of unduplicated students placed 
                        in cooperative education jobs in each 
                        fiscal year compared to the previous 
                        fiscal year; and
                  (B) keep such records as are essential to 
                ensure that the applicant is complying with the 
                provisions of this title, including the 
                notation of cooperative education employment on 
                the student's transcript;
          (7) describe the extent to which programs in the 
        academic discipline for which the application is made 
        have had a favorable reception by public and private 
        sector employers;
          (8) describe the extent to which the institution is 
        committed to extending cooperative education on an 
        institution-wide basis for all students who can 
        benefit;
          (9) describe the plans that the applicant will carry 
        out to evaluate the applicant's cooperative education 
        program at the end of the grant period;
          (10) provide 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 applicant under this title;
          (11) demonstrate a commitment to serving all 
        underserved populations; and
          (12) include such other information as is essential 
        to carry out the provisions of this title.
  (c) Duration of Grants; Federal Share.--
          (1) Duration of grants.--No individual institution of 
        higher education may receive, individually or as a 
        participant in a combination of such institutions--
                  (A) a grant pursuant to subsection (a)(1)(A) 
                for more than 5 fiscal years; or
                  (B) a grant pursuant to subsection (a)(1)(B) 
                for more than 5 fiscal years.
          (2) Federal share.--The Federal share of a grant 
        under section 803(a)(1)(A) may not exceed--
                  (A) 85 percent of the cost of carrying out 
                the program or activities described in the 
                application in the first year the applicant 
                receives a grant under this section;
                  (B) 70 percent of such cost in the second 
                such year;
                  (C) 55 percent of such cost in the third such 
                year;
                  (D) 40 percent of such cost in the fourth 
                such year; and
                  (E) 25 percent of such cost in the fifth such 
                year.
          (3) Special rule.--Any provision of law to the 
        contrary notwithstanding, the Secretary shall not waive 
        the provisions of this subsection.
  (d) Maintenance of Effort.--If the Secretary determines that 
a recipient of funds under this section has failed to maintain 
the fiscal effort described in subsection (b)(3), then the 
Secretary may elect not to make grant payments under this 
section to such recipient.

SEC. 804. DEMONSTRATION AND INNOVATION PROJECTS; TRAINING AND RESOURCE 
                    CENTERS; AND RESEARCH.

  (a) Authorization.--The Secretary is authorized, in 
accordance with the provisions of this section, to make grants 
and enter into contracts--
          (1) from the amounts available in each fiscal year 
        under section 802(b)(3), for the conduct of 
        demonstration projects designed to demonstrate or 
        determine the feasibility or value of innovative 
        methods of cooperative education ;
          (2) from the amounts available in each fiscal year 
        under section 802(b)(4), for the conduct of training 
        and resource centers designed to--
                  (A) train personnel in the field of 
                cooperative education;
                  (B) improve materials used in cooperative 
                education programs if such improvement is 
                conducted in conjunction with other activities 
                described in this paragraph;
                  (C) furnish technical assistance to 
                institutions of higher education to increase 
                the potential of the institution to continue to 
                conduct a cooperative education program without 
                Federal assistance;
                  (D) encourage model cooperative education 
                programs which furnish education and training 
                in occupations in which there is a national 
                need;
                  (E) support partnerships under which an 
                institution carrying out a comprehensive 
                cooperative education program joins with one or 
                more institutions of higher education in order 
                to--
                          (i) assist the institutions other 
                        than the comprehensive cooperative 
                        education institution to develop and 
                        expand an existing program of 
                        cooperative education; or
                          (ii) establish and improve or expand 
                        comprehensive cooperative education 
                        programs; and
                  (F) encourage model cooperative education 
                programs in the fields of science and 
                mathematics for women and minorities who are 
                underrepresented in such fields; and
          (3) from the amounts available in each fiscal year 
        under section 802(b)(5), for the conduct of research 
        relating to cooperative education.
  (b) Administrative Provision.--
          (1) In general.--To carry out this section, the 
        Secretary may--
                  (A) make grants to or contracts with 
                institutions of higher education, or 
                combinations of such institutions; and
                  (B) make grants to or contracts with other 
                public or private nonprofit agencies or 
                organizations, whenever such grants or 
                contracts will make an especially significant 
                contribution to attaining the objectives of 
                this section.
          (2) Limitation.--
                  (A) The Secretary may not use more than 3 
                percent of the amount appropriated to carry out 
                this section in each fiscal year to make grants 
                or enter into contracts described in paragraph 
                (1)(A).
                  (B) The Secretary may use not more than 3 
                percent of the amount appropriated to carry out 
                this section in each fiscal year to make grants 
                or enter into contracts described in paragraph 
                (1)(B).
  (c) Supplement Not Supplant.--A recipient of a grant or 
contract under this section may use the funds provided only to 
supplement and, to the extent possible, increase the level of 
funds that would, in the absence of such funds, be made 
available from non-Federal sources to carry out the activities 
supported by such grant or contract, and in no case to supplant 
such funds from non-Federal sources.

                     XVII. COMMITTEE CORRESPONDENCE

    None.

                             MINORITY VIEWS

    Republican Members of the Committee on Education and Labor 
are committed to ensuring that every child in America is 
afforded the highest quality education possible. We also remain 
committed to the principle of a balanced budget without raising 
taxes. A balanced budget can be obtained by supporting pro-
growth economic policies, restraining excessive entitlement 
spending, and ensuring programs are working as efficiently as 
possible--Committee Republicans have supported all of these 
proposals.
    While Committee Republicans appreciated the ability to 
contribute and improve the final bill, we strongly disagree 
with the abuse of the reconciliation process, the level of cuts 
that were included in the final bill and the significant amount 
of new entitlement spending that is not focused on increasing 
access to higher education for low-income students. In 
addition, we strongly object to the shift in focus of 
entitlement spending away from individuals to institutions of 
higher education that have failed to control excessive tuition 
increases thereby causing the most harm to the exact students 
this bill should be supporting.

                The Abuse of the Reconciliation Process

    Committee Republicans reject the idea that the 
reconciliation process should be used to overhaul the student 
loan programs in a manner that could not pass under regular 
order and that results in an unprecedented expansion of 
entitlement spending coupled with minimal deficit reduction. 
Under Republican leadership, the Committee established a strong 
record on matters of deficit reduction. In the Fiscal Year (FY) 
2006 budget, the then-Education & the Workforce Committee was 
tasked with finding more than $12 billion in budget savings 
over five years--the second highest total of any House 
Committee. Not only did we find those savings through slashing 
costly subsidies to student loan lenders, but we also found 
nearly eight billion dollars in additional savings, which we 
translated into new and expanded benefits for ALL college 
students. In short, reconciliation served its deficit reduction 
purpose--and then some. The reconciliation bill in this 
Congress only produced $750 million for deficit reduction.
    The Committee, under the reconciliation process in the 
109th Congress, made $20 billion worth of changes to the 
student loan programs that eliminated wasteful federal 
subsidies and reduced the potential for fraud and abuse in the 
programs. For example, the Committee permanently prohibited the 
creation of new loans through certain tax-exempt bonds issued 
from 1980-1993 that guarantee a 9.5 percent yield to lenders. 
The Committee also increased risk sharing on the part of 
private lenders in the Federal Family Education Loan (FFEL) 
program by decreasing the percentage that a lender will receive 
when a borrower defaults on a student loan. Finally, the 
Committee supported a provision in the Deficit Reduction Act 
(DRA) that moved the administrative portion of the section 458 
account from a mandatory spending account to a discretionary 
spending account.
    The billions in savings to the American taxpayer were 
achieved at the same time the Committee expanded benefits for 
ALL students and made changes that ensured students would be 
able to pay for their college education. Building upon the 
President's FY 2006 budget request the Committee, under 
Republican leadership, expanded loan limits for first year, 
second year, and graduate students. For the first time ever, 
graduate students would be able to access Federal PLUS loans, 
which permit borrowers to borrow up to the cost of attendance. 
In addition, the Committee reduced fees paid by students from 
up to four percent to just one percent over the five year 
period.
    While making it clear that decisions over school curricula 
are best made by State and local authorities, the Committee 
also included a program to provide additional grant funds to 
Pell-eligible, high achieving college students. The Academic 
Competitiveness Grant (ACG) program provides first year college 
students who completed a rigorous high school curriculum at a 
public or private high school an extra $750 in grant aid; 
second year college students who completed a rigorous high 
school curriculum at a public or private high school receive 
$1,300 in additional grant aid. The National Science and 
Mathematics Access to Retain Talent (SMART) Grants of up to 
$4,000 go to third and fourth year students who are majoring in 
math, science, or certain foreign languages.
    Finally, the Deficit Reduction Act included a provision to 
make permanent provisions included in the Taxpayer-Teacher 
Protection Act of 2004 that would more than triple the amount 
of student loan forgiveness available to highly qualified math, 
science, and special education teachers. The increase from 
$5,000 to $17,500 in loan forgiveness for these qualified 
educators was based on a proposal from President Bush's FY 2005 
budget request.
    The changes made last Congress resulted in more financial 
aid being available to students today than at any time in 
history.
    In sum, under Republican leadership, the Committee used the 
reconciliation process for the purpose it was intended--to 
reduce the federal deficit. Unfortunately, the Committee, under 
Democrat leadership, has subverted the original intent of the 
reconciliation process and abused the process to shield the 
billions of new entitlement spending included in the bill. This 
point is made clear by the fact that the Committee on Education 
and Labor was the only Committee given a reconciliation 
instruction in the Budget Resolution. In fact, during the 
budget debate in the Senate, Budget Committee Chairman Conrad 
called the House instruction a ``stalking-horse for a 
significant expansion of spending.'' The reconciliation process 
has been clearly abused here. The process was meant for deficit 
reduction, not as a backdoor way to spend billions of dollars 
on new programs.

                        New Entitlement Spending

    The Democrat-led student loan bill, the College Cost 
Reduction Act, finds $19 billion in savings within higher 
education programs over the next five years. In the last 
Congress, two-thirds of our budget reconciliation savings went 
towards deficit reduction and one-third went toward increasing 
student benefits like higher loan limits, more grant aid for 
low-income, high-achieving students, and loan forgiveness for 
high-demand teachers. And while this bill does some of the 
same, it also targets new aid toward those who already have 
graduated and to institutions of higher education. These are 
examples of misplaced priorities; student aid is intended to go 
to students.
    The bill then spends almost all of the $19 billion on new 
entitlement spending, including nine new entitlement programs, 
most of which does not even further the goals of college access 
and persistence.
    For example, the bill spends less than one-third of the 
savings on the Pell Grant program. Instead, the money is spent 
on assisting those who have already taken advantage of 
government subsidies and graduated from college and new 
programs aimed at institutions rather than students. In 
contrast, the defeated Republican substitute would have spent 
$12 billion on increasing the Pell Grant. Assuming the House 
stands behind the maximum Pell Grant award included in the 
Labor/HHS/Education Appropriations bill, this infusion of funds 
would increase the maximum Pell Grant to $5,050 in the 2008-
2009 academic year and raise it to $5,450 by the 2012-2013 
academic year. The Republican substitute would have increased 
the Pell Grant without creating a maze of new rules and 
regulations for students, parents, and institutions to 
navigate.
    The most expensive provision in the bill reduces interest 
rates for a subsection of borrowers--individuals that received 
subsidized loans for their undergraduate education. The 
interest rate is slowly phased down to 3.4 percent for a five 
year period. The 3.4 percent is only in effect for one year 
before it jumps back up to 6.8 percent. Democrats claim that a 
typical borrower would save $4,400 over the life of the loan 
due to the interest rate cut. It is impossible for a borrower 
to save that much under this bill. In order to save the full 
$4,400, the 3.4 percent rate must stay in effect for years at a 
time--and they must consolidate their loans and stretch out 
repayment over 15 years. In reality, a college freshman in the 
fall of 2012--when the rate is at 3.4 percent--would only end 
up saving $6.42 per month once he or she begins repaying the 
student loan. Worse yet, these new benefits would not be aimed 
at a single college student. By definition, they are intended 
for those already have graduated from college. Republicans, in 
contrast, believe benefits should be aimed squarely at those 
attending or hoping to attend college.
    The bill also establishes another repayment program for 
borrowers, costing almost $1 billion to U.S. taxpayers. This 
proposal caps a borrower's monthly repayment amount at 15 
percent of the borrower's discretionary income. The student 
loan programs already have four different repayment options and 
the ability to enter into deferment or forbearance during times 
of financial distress. Borrowers are able to switch between 
plans to ensure that they are repaying their loans in a manner 
that suits their current financial situation. A new repayment 
plan will only add confusion and complication to an already 
complex program.
    Finally, the bill spends over $1.6 billion of new 
entitlement spending in providing aid to institutions without 
the accountability provided by the annual appropriations 
process. This represents a major policy shift in how mandatory 
funds are spent. The federal government historically reserves 
entitlement funding streams for programs that provide a direct 
benefit to an individual--such as a Social Security check, 
Medicare benefit, or a student loan. These benefits are 
portable and can be used by the individual wherever they live 
or to purchase services. The creation of new entitlement 
spending to an institution of higher education takes the 
spending of taxpayer dollars outside the purview and oversight 
conducted by the Appropriations Committee and a steady flow of 
funds goes to institutions regardless of the need or the 
quality of the program that is being funded. The country's debt 
is already fueled primarily by the skyrocketing growth in 
entitlement spending. If this growth in spending continues, it 
will be more difficult for future generations to continue to 
enjoy the same standard of living that we enjoy today.

                             Level of Cuts

    The reconciliation bill voted on in Committee threatens the 
stability of the Federal Family Education Loan (FFEL) program. 
Just last Congress, the Committee cut approximately $20 billion 
from the student loan program in the DRA. Just two short years 
later, the Committee, under Democrat leadership, is cutting an 
additional $19 billion from the FFEL program. The Committee 
took this action without even allowing enough time to pass to 
analyze the impact of the changes that took place in the DRA. 
Not one hearing has taken place on the impact of the DRA from 
last Congress or on the impact of additional cuts proposed in 
this legislation. In addition, the bill was only introduced one 
day prior to the markup, leaving very little time for Members 
and others to understand the true impact of the cuts.
    Republicans believe that the private-market student loan 
program can withstand the level of the cuts included in the 
DRA, even though that substantial reduction in subsidies paid 
to student loan providers participating in the FFEL program 
could lead to some reduced access to loans. However, additional 
cuts to student loan providers should have been more carefully 
studied if the Committee intended to ensure a viable FFEL 
program for students and institutions of higher education 
across the country who count on the FFEL program for their 
student loans.
    A more reasonable alternative would have been to accept the 
Republican substitute. This bill would have trimmed the 
subsidies provided to student loan providers in the FFEL 
program while maintaining the stability of the program, thereby 
ensuring that competition between the FFEL program and the 
government-run Direct Loan program continues in the future. 
Specifically, the Republican substitute would have adopted the 
same cut to lender insurance rates, saved the federal 
government $11 billion through lower special allowance 
payments, and saved $2.8 billion through restructuring the 
manner in which guaranty agencies are reimbursed for their 
administrative and collection activities.
    One additional area that provides several Republicans with 
some concern is the amendment offered during the markup to 
require a study of market mechanisms that could then be used to 
determine lender returns when making student loans. The study 
would specifically look at the use of auctions and provide for 
a test of the most promising models. The Department of 
Education did a market mechanisms study several years ago with 
the Government Accountability Office and others which did not 
find auctions to be a workable mechanism for administering the 
student loan program. While another look at the issue may shed 
new light on the subject, we should not assume that a new study 
will necessarily result in a different determination. An 
auction system may further complicate the federal student loan 
programs, particularly for institutions. In addition, under an 
auction system students lose their right to choose a lender, 
something Republicans have been fighting to protect in many of 
the proposals that have been introduced in the past. If 
students have no right to pick their lender, competition in the 
student loan program and the benefits that competition brings 
are lost altogether.

                               Conclusion

    Committee Republicans appreciated the inclusive nature of 
the process that went into developing this bill and hope that 
the Committee can work together as this legislation moves to 
the House Floor. However, Republicans continue to have major 
concerns about the use of the reconciliation process to 
legislate significant cuts to the FFEL program and extravagant 
new entitlement spending. Had this legislation taken a more 
reasonable approach to reducing subsidies and spending more of 
the money saved on actual students, rather than college 
graduates and institutions, there may well have been a 
different result. The cuts made in this bill threaten the 
stability of the FFEL program, a program that has been 
successful, competitive and is the program of choice for almost 
80 percent of student loan borrowers in this country. Committee 
Republicans fear that this bill, if left unchanged, will force 
smaller lenders out of the business, reduce competition, and 
eliminate student benefits. Students should be the main focus 
of the student aid proposals the Committee puts forward, but in 
the end, they will lose if this bill is passed in its current 
form. It is our hope that serving students and ensuring the 
stability of both of the student loan programs is the goal of 
the bill as it moves to the House Floor.

                                   Howard P. McKeon.
                                   Pete Hoekstra.
                                   Mark Souder.
                                   Judy Biggert.
                                   Todd R. Platts.
                                   Ric Keller.
                                   Joe Wilson.
                                   John Kline.
                                   K. Marchant.
                                   C.W. Boustany, Jr.
                                   Virginia Foxx.
                                   Rob Bishop.
                                   David Davis.
                                   Tim Walberg.