HERA statute

PUBLIC LAW 109–171—FEB. 8, 2006

120 STAT. 155

Subtitle G—Effective Date
SEC. 7701. EFFECTIVE DATE.

42 USC 603 note.

Except as otherwise provided in this title, this title and the
amendments made by this title shall take effect as if enacted
on October 1, 2005.

TITLE VIII—EDUCATION AND PENSION
BENEFIT PROVISIONS
Subtitle A—Higher Education Provisions

Higher Education
Reconciliation
Act of 2005.

SEC. 8001. SHORT TITLE; REFERENCE; EFFECTIVE DATE.

(a) SHORT TITLE.—This subtitle may be cited as the ‘‘Higher
Education Reconciliation Act of 2005’’.
(b) REFERENCES.—Except as otherwise expressly provided,
whenever in this subtitle 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.).
(c) EFFECTIVE DATE.—Except as otherwise provided in this
subtitle or the amendments made by this subtitle, the amendments
made by this subtitle shall be effective July 1, 2006.

20 USC 1001
note.

20 USC 1002
note.

SEC. 8002. MODIFICATION OF 50/50 RULE.

Section 102(a)(3) (20 U.S.C. 1002(a)(3)) is amended—
(1) in subparagraph (A), by inserting ‘‘(excluding courses
offered by telecommunications as defined in section 484(l)(4))’’
after ‘‘courses by correspondence’’; and
(2) in subparagraph (B), by inserting ‘‘(excluding courses
offered by telecommunications as defined in section 484(l)(4))’’
after ‘‘correspondence courses’’.
SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

Subpart 1 of part A of title IV (20 U.S.C. 1070a) is amended
by adding after section 401 the following new section:
‘‘SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

20 USC 1070a–1.

‘‘(a) ACADEMIC COMPETITIVENESS GRANT PROGRAM.—
‘‘(1) ACADEMIC COMPETITIVENESS GRANTS AUTHORIZED.—
The Secretary shall award grants, in the amounts specified
in subsection (d)(1), to eligible students to assist the eligible
students in paying their college education expenses.
‘‘(2) ACADEMIC COMPETITIVENESS COUNCIL.—
‘‘(A) ESTABLISHMENT.—There is established an Academic Competitiveness Council (referred to in this paragraph as the ‘Council’). From the funds made available
under subsection (e) for fiscal year 2006, $50,000 shall
be available to the Council to carry out the duties described
in subparagraph (B). The Council shall be chaired by the
Secretary of Education, and the membership of the Council

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120 STAT. 156

Regulations.

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PUBLIC LAW 109–171—FEB. 8, 2006

shall consist of officials from Federal agencies with responsibilities for managing existing Federal programs that promote mathematics and science (or designees of such officials
with significant decision-making authority).
‘‘(B) DUTIES.—The Council shall—
‘‘(i) identify all Federal programs with a mathematics or science focus;
‘‘(ii) identify the target populations being served
by such programs;
‘‘(iii) determine the effectiveness of such programs;
‘‘(iv) identify areas of overlap or duplication in
such programs; and
‘‘(v) recommend ways to efficiently integrate and
coordinate such programs.
‘‘(C) REPORT.—Not later than one year after the date
of enactment of the Higher Education Reconciliation Act
of 2005, the Council shall transmit a report to each committee of Congress with jurisdiction over a Federal program
identified under subparagraph (B)(i), detailing the findings
and recommendations under subparagraph (B), including
recommendations for legislative or administrative action.
‘‘(b) DESIGNATION.—A grant under this section—
‘‘(1) for the first or second academic year of a program
of undergraduate education shall be known as an ‘Academic
Competitiveness Grant’; and
‘‘(2) for the third or fourth academic year of a program
of undergraduate education shall be known as a ‘National
Science and Mathematics Access to Retain Talent Grant’ or
a ‘National SMART Grant’.
‘‘(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;
‘‘(2) is eligible for a Federal Pell Grant; and
‘‘(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) has successfully completed, after January 1,
2006, a rigorous secondary school program of study
established by a State or local educational agency and
recognized as such by the Secretary; and
‘‘(ii) has not been previously enrolled in a program
of undergraduate education;
‘‘(B) the second academic year of a program of undergraduate education at a two- or four-year degree-granting
institution of higher education—
‘‘(i) has successfully completed, after January 1,
2005, a rigorous secondary school program of study
established by a State or local educational agency and
recognized as such by the Secretary; and
‘‘(ii) has obtained a cumulative grade point average
of at least 3.0 (or the equivalent as determined under
regulations prescribed by the Secretary) at the end
of the first academic year of such program of undergraduate education; or

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PUBLIC LAW 109–171—FEB. 8, 2006

120 STAT. 157

‘‘(C) the third or fourth academic year of a program
of undergraduate education at a four-year degree-granting
institution of higher education—
‘‘(i) is pursuing a major in—
‘‘(I) the physical, life, or computer sciences,
mathematics, technology, or engineering (as determined by the Secretary pursuant to regulations);
or
‘‘(II) a foreign language that the Secretary,
in consultation with the Director of National Intelligence, determines is critical to the national security of the United States; and
‘‘(ii) has obtained a cumulative grade point average
of at least 3.0 (or the equivalent as determined under
regulations prescribed by the Secretary) in the
coursework required for the major described in clause
(i).
‘‘(d) GRANT AWARD.—
‘‘(1) AMOUNTS.—
‘‘(A) The Secretary shall award a grant under this
section in the amount of—
‘‘(i) $750 for an eligible student under subsection
(c)(3)(A);
‘‘(ii) $1,300 for an eligible student under subsection
(c)(3)(B); or
‘‘(iii) $4,000 for an eligible student under subsection (c)(3)(C).
‘‘(B) Notwithstanding subparagraph (A)—
‘‘(i) the amount of such grant, in combination with
the Federal Pell Grant assistance and other student
financial assistance available to such student, shall
not exceed the student’s cost of attendance;
‘‘(ii) if the amount made available under subsection
(e) for any fiscal year is less than the amount required
to be provided grants to all eligible students in the
amounts determined under subparagraph (A) and
clause (i) of this subparagraph, then the amount of
the grant to each eligible student shall be ratably
reduced; and
‘‘(iii) if additional amounts are appropriated for
any such fiscal year, such reduced amounts shall be
increased on the same basis as they were reduced.
‘‘(2) LIMITATIONS.—The Secretary shall not award a grant
under this section—
‘‘(A) to any student for an academic year of a program
of undergraduate education described in subparagraph (A),
(B), or (C) of subsection (c)(3) for which the student received
credit before the date of enactment of the Higher Education
Reconciliation Act of 2005; or
‘‘(B) to any student for more than—
‘‘(i) one academic year under subsection (c)(3)(A);
‘‘(ii) one academic year under subsection (c)(3)(B);
or
‘‘(iii) two academic years under subsection (c)(3)(C).
‘‘(e) FUNDING.—
‘‘(1) AUTHORIZATION AND APPROPRIATION OF FUNDS.—There
are authorized to be appropriated, and there are appropriated,

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120 STAT. 158

PUBLIC LAW 109–171—FEB. 8, 2006

out of any money in the Treasury not otherwise appropriated,
for the Department of Education to carry out this section—
‘‘(A) $790,000,000 for fiscal year 2006;
‘‘(B) $850,000,000 for fiscal year 2007;
‘‘(C) $920,000,000 for fiscal year 2008;
‘‘(D) $960,000,000 for fiscal year 2009; and
‘‘(E) $1,010,000,000 for fiscal year 2010.
‘‘(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 in the
amounts authorized by subsection (d), then all of the excess
funds shall remain available for awarding grants under this
section during the subsequent fiscal year.
‘‘(f) RECOGNITION OF PROGRAMS OF STUDY.—The Secretary shall
recognize at least one rigorous secondary school program of study
in each State under subsection (c)(3)(A) and (B) for the purpose
of determining student eligibility under such subsection.
‘‘(g) SUNSET PROVISION.—The authority to make grants under
this section shall expire at the end of academic year 2010–2011.’’.
SEC. 8004. REAUTHORIZATION OF FEDERAL FAMILY EDUCATION LOAN
PROGRAM.

(a) AUTHORIZATION OF APPROPRIATIONS.—Section 421(b)(5) (20
U.S.C. 1071(b)(5)) is amended by striking ‘‘an administrative cost
allowance’’ and inserting ‘‘a loan processing and issuance fee’’.
(b) EXTENSION OF AUTHORITY.—
(1) FEDERAL INSURANCE LIMITATIONS.—Section 424(a) (20
U.S.C. 1074(a)) is amended—
(A) by striking ‘‘2004’’ and inserting ‘‘2012’’; and
(B) by striking ‘‘2008’’ and inserting ‘‘2016’’.
(2) GUARANTEED LOANS.—Section 428(a)(5) (20 U.S.C.
1078(a)(5)) is amended—
(A) by striking ‘‘2004’’ and inserting ‘‘2012’’; and
(B) by striking ‘‘2008’’ and inserting ‘‘2016’’.
(3) CONSOLIDATION LOANS.—Section 428C(e) (20 U.S.C.
1078–3(e)) is amended by striking ‘‘2004’’ and inserting ‘‘2012’’.
SEC. 8005. LOAN LIMITS.

(a) FEDERAL INSURANCE LIMITS.—Section 425(a)(1)(A) (20
U.S.C. 1075(a)(1)(A)) is amended—
(1) in clause (i)(I), by striking ‘‘$2,625’’ and inserting
‘‘$3,500’’; and
(2) in clause (ii)(I), by striking ‘‘$3,500’’ and inserting
‘‘$4,500’’.
(b) GUARANTEE LIMITS.—Section 428(b)(1)(A) (20 U.S.C.
1078(b)(1)(A)) is amended—
(1) in clause (i)(I), by striking ‘‘$2,625’’ and inserting
‘‘$3,500’’; and
(2) in clause (ii)(I), by striking ‘‘$3,500’’ and inserting
‘‘$4,500’’.
(c) FEDERAL PLUS LOANS.—Section 428B (20 U.S.C. 1078–
2) is amended—
(1) in subsection (a)(1)—
(A) in the matter preceding subparagraph (A), by
striking ‘‘Parents’’ and inserting ‘‘A graduate or professional
student or the parents’’;

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(B) in subparagraph (A), by striking ‘‘the parents’’ and
inserting ‘‘the graduate or professional student or the parents’’; and
(C) in subparagraph (B), by striking ‘‘the parents’’ and
inserting ‘‘the graduate or professional student or the parents’’;
(2) in subsection (b), by striking ‘‘any parent’’ and inserting
‘‘any graduate or professional student or any parent’’;
(3) in subsection (c)(2), by striking ‘‘parent’’ and inserting
‘‘graduate or professional student or parent’’; and
(4) in subsection (d)(1), by striking ‘‘the parent’’ and
inserting ‘‘the graduate or professional student or the parent’’.
(d) UNSUBSIDIZED STAFFORD LOANS FOR GRADUATE OR PROFESSIONAL STUDENTS.—Section 428H(d)(2) (20 U.S.C. 1078–8(d)(2)) is
amended—
(1) in subparagraph (C), by striking ‘‘$10,000’’ and inserting
‘‘$12,000’’; and
(2) in subparagraph (D)—
(A) in clause (i), by striking ‘‘$5,000’’ and inserting
‘‘$7,000’’; and
(B) in clause (ii), by striking ‘‘$5,000’’ and inserting
‘‘$7,000’’.
(e) EFFECTIVE DATE OF INCREASES.—The amendments made
by subsections (a), (b), and (d) shall be effective July 1, 2007.

20 USC 1075
note.

SEC. 8006. PLUS LOAN INTEREST RATES AND ZERO SPECIAL ALLOWANCE PAYMENT.

(a) PLUS LOANS.—Section 427A(l)(2) (20 U.S.C. 1077a(l)(2))
is amended by striking ‘‘7.9 percent’’ and inserting ‘‘8.5 percent’’.
(b) CONFORMING AMENDMENTS FOR SPECIAL ALLOWANCES.—
(1) AMENDMENTS.—Subparagraph (I) of section 438(b)(2)
(20 U.S.C. 1087–1(b)(2)) is amended—
(A) in clause (iii), by striking ‘‘, subject to clause (v)
of this subparagraph’’;
(B) in clause (iv), by striking ‘‘, subject to clause (vi)
of this subparagraph’’; and
(C) by striking clauses (v), (vi), and (vii) and inserting
the following:
‘‘(v) RECAPTURE OF EXCESS INTEREST.—
‘‘(I) EXCESS CREDITED.—With respect to a loan
on which the applicable interest rate is determined
under subsection (k) or (l) of section 427A and
for which the first disbursement of principal is
made on or after April 1, 2006, if the applicable
interest rate for any 3-month period exceeds the
special allowance support level applicable to such
loan under this subparagraph for such period, then
an adjustment shall be made by calculating the
excess interest in the amount computed under subclause (II) of this clause, and by crediting the
excess interest to the Government not less often
than annually.
‘‘(II) CALCULATION OF EXCESS.—The amount
of any adjustment of interest on a loan to be made
under this subsection for any quarter shall be
equal to—

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PUBLIC LAW 109–171—FEB. 8, 2006
‘‘(aa) the applicable interest rate minus
the special allowance support level determined
under this subparagraph; multiplied by
‘‘(bb) the average daily principal balance
of the loan (not including unearned interest
added to principal) during such calendar
quarter; divided by
‘‘(cc) four.
‘‘(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) in determining such sum.’’.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall not apply with respect to any special allowance
payment made under section 438 of the Higher Education Act
of 1965 (20 U.S.C. 1087–1) before April 1, 2006.

20 USC 1087–1
note.

SEC. 8007. DEFERMENT OF STUDENT LOANS FOR MILITARY SERVICE.

(a) FEDERAL FAMILY EDUCATION LOANS.—Section 428(b)(1)(M)
(20 U.S.C. 1078(b)(1)(M)) is amended—
(1) by striking ‘‘or’’ at the end of clause (ii);
(2) by redesignating clause (iii) as clause (iv); and
(3) by inserting after clause (ii) the following new clause:
‘‘(iii) not in excess of 3 years during which the
borrower—
‘‘(I) is serving on active duty during a war
or other military operation or national emergency;
or
‘‘(II) is performing qualifying National Guard
duty during a war or other military operation or
national emergency; or’’.
(b) DIRECT LOANS.—Section 455(f)(2) (20 U.S.C. 1087e(f)(2))
is amended—
(1) by redesignating subparagraph (C) as subparagraph
(D); and
(2) by inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) not in excess of 3 years during which the
borrower—
‘‘(i) is serving on active duty during a war or
other military operation or national emergency; or
‘‘(ii) is performing qualifying National Guard duty
during a war or other military operation or national
emergency; or’’.
(c) PERKINS LOANS.—Section 464(c)(2)(A) (20 U.S.C.
1087dd(c)(2)(A)) is amended—
(1) by redesignating clauses (iii) and (iv) as clauses (iv)
and (v), respectively; and
(2) by inserting after clause (ii) the following new clause:
‘‘(iii) not in excess of 3 years during which the
borrower—

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‘‘(I) is serving on active duty during a war
or other military operation or national emergency;
or
‘‘(II) is performing qualifying National Guard
duty during a war or other military operation or
national emergency;’’.
(d) DEFINITIONS.—Section 481 (20 U.S.C. 1088) is amended
by adding at the end the following new subsection:
‘‘(d) DEFINITIONS FOR MILITARY DEFERMENTS.—For purposes
of parts B, D, and E of this title:
‘‘(1) ACTIVE DUTY.—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 does not include active duty for
training or attendance at a service school.
‘‘(2) MILITARY OPERATION.—The term ‘military operation’
means a contingency operation as such term is defined in
section 101(a)(13) of title 10, United States Code.
‘‘(3) NATIONAL EMERGENCY.—The term ‘national emergency’
means the national emergency by reason of certain terrorist
attacks declared by the President on September 14, 2001, or
subsequent national emergencies declared by the President by
reason of terrorist attacks.
‘‘(4) SERVING ON ACTIVE DUTY.—The term ‘serving on active
duty during a war or other military operation or national
emergency’ means service by an individual who is—
‘‘(A) a Reserve of an Armed Force ordered to active
duty under section 12301(a), 12301(g), 12302, 12304, or
12306 of title 10, United States Code, or any retired
member of an Armed Force ordered to active duty under
section 688 of such title, for service in connection with
a war or other military operation or national emergency,
regardless of the location at which such active duty service
is performed; and
‘‘(B) any other member of an Armed Force on active
duty in connection with such emergency or subsequent
actions or conditions who has been assigned to a duty
station at a location other than the location at which such
member is normally assigned.
‘‘(5) QUALIFYING NATIONAL GUARD DUTY.—The term ‘qualifying National Guard duty during a war or other military
operation or national emergency’ means service as a member
of the National Guard on full-time National Guard duty (as
defined in section 101(d)(5) of title 10, United States Code)
under a call to active service authorized by the President or
the Secretary of Defense for a period of more than 30 consecutive days under section 502(f) of title 32, United States Code,
in connection with a war, other military operation, or a national
emergency declared by the President and supported by Federal
funds.’’.
(e) RULE OF CONSTRUCTION.—Nothing in the amendments made
by this section shall be construed to authorize any refunding of
any repayment of a loan.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply with respect to loans for which the first disbursement
is made on or after July 1, 2001.

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20 USC 1078
note.
20 USC 1078
note.

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SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

Applicability.

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(a)
DISBURSEMENT.—Section
428(b)(1)(N)
(20
U.S.C.
1078(b)(1)(N)) is amended—
(1) by striking ‘‘or’’ at the end of clause (i); and
(2) by striking clause (ii) and inserting the following:
‘‘(ii) in the case of a student who is studying outside the United States in a program of study abroad
that is approved for credit by the home institution
at which such student is enrolled, and only after
verification of the student’s enrollment by the lender
or guaranty agency, are, at the request of the student,
disbursed directly to the student by the means
described in clause (i), unless such student requests
that the check be endorsed, or the funds transfer be
authorized, pursuant to an authorized power-ofattorney; or
‘‘(iii) in the case of a student who is studying
outside the United States in a program of study at
an eligible foreign institution, are, at the request of
the foreign institution, disbursed directly to the student, only after verification of the student’s enrollment
by the lender or guaranty agency by the means
described in clause (i).’’.
(b) REPAYMENT PLANS: DIRECT LOANS.—Section 455(d)(1) (20
U.S.C. 1087e(d)(1)) is amended by striking subparagraphs (A), (B),
and (C) and inserting the following:
‘‘(A) a standard repayment plan, consistent with subsection (a)(1) of this section and with section 428(b)(9)(A)(i);
‘‘(B) a graduated repayment plan, consistent with section 428(b)(9)(A)(ii);
‘‘(C) an extended repayment plan, consistent with section 428(b)(9)(A)(v), except that the borrower shall annually
repay a minimum amount determined by the Secretary
in accordance with section 428(b)(1)(L); and’’.
(c) ORIGINATION FEES.—
(1) FFEL PROGRAM.—Paragraph (2) of section 438(c) (20
U.S.C. 1087–1(c)) is amended—
(A) by striking the designation and heading of such
paragraph and inserting the following:
‘‘(2) AMOUNT OF ORIGINATION FEES.—
‘‘(A) IN GENERAL.—’’; and
(B) by adding at the end the following new subparagraph:
‘‘(B) SUBSEQUENT REDUCTIONS.—Subparagraph (A)
shall be applied to loans made under this part (other than
loans made under sections 428C and 439(o))—
‘‘(i) by substituting ‘2.0 percent’ for ‘3.0 percent’
with respect to loans for which the first disbursement
of principal is made on or after July 1, 2006, and
before July 1, 2007;
‘‘(ii) by substituting ‘1.5 percent’ for ‘3.0 percent’
with respect to loans for which the first disbursement
of principal is made on or after July 1, 2007, and
before July 1, 2008;
‘‘(iii) by substituting ‘1.0 percent’ for ‘3.0 percent’
with respect to loans for which the first disbursement

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of principal is made on or after July 1, 2008, and
before July 1, 2009;
‘‘(iv) by substituting ‘0.5 percent’ for ‘3.0 percent’
with respect to loans for which the first disbursement
of principal is made on or after July 1, 2009, and
before July 1, 2010; and
‘‘(v) by substituting ‘0.0 percent’ for ‘3.0 percent’
with respect to loans for which the first disbursement
of principal is made on or after July 1, 2010.’’.
(2) DIRECT LOAN PROGRAM.—Subsection (c) of section 455
(20 U.S.C. 1087e(c)) is amended—
(A) by striking ‘‘(c) LOAN FEE.—’’ and inserting the
following:
‘‘(c) LOAN FEE.—
‘‘(1) IN GENERAL.—’’; and
(B) by adding at the end the following:
‘‘(2) SUBSEQUENT REDUCTION.—Paragraph (1) shall be
applied to loans made under this part, other than Federal
Direct Consolidation loans and Federal Direct PLUS loans—
‘‘(A) by substituting ‘3.0 percent’ for ‘4.0 percent’ with
respect to loans for which the first disbursement of principal is made on or after the date of enactment of the
Higher Education Reconciliation Act of 2005, and before
July 1, 2007;
‘‘(B) by substituting ‘2.5 percent’ for ‘4.0 percent’ with
respect to loans for which the first disbursement of principal is made on or after July 1, 2007, and before July
1, 2008;
‘‘(C) by substituting ‘2.0 percent’ for ‘4.0 percent’ with
respect to loans for which the first disbursement of principal is made on or after July 1, 2008, and before July
1, 2009;
‘‘(D) by substituting ‘1.5 percent’ for ‘4.0 percent’ with
respect to loans for which the first disbursement of principal is made on or after July 1, 2009, and before July
1, 2010; and
‘‘(E) by substituting ‘1.0 percent’ for ‘4.0 percent’ with
respect to loans for which the first disbursement of principal is made on or after July 1, 2010.’’.
(3) CONFORMING AMENDMENT.—Section 455(b)(8)(A) (20
U.S.C. 1087e(b)(8)(A)) is amended by inserting ‘‘or origination
fee’’ after ‘‘reductions in the interest rate’’.

Applicability.

SEC. 8009. CONSOLIDATION LOAN CHANGES.

(a) CONSOLIDATION BETWEEN PROGRAMS.—Section 428C (20
U.S.C. 1078–3) is amended—
(1) in subsection (a)(3)(B)(i)—
(A) by inserting ‘‘or under section 455(g)’’ after ‘‘under
this section’’ both places it appears;
(B) by inserting ‘‘under both sections’’ after ‘‘terminates’’;
(C) by striking ‘‘and’’ at the end of subclause (III);
(D) by striking the period at the end of subclause
(IV) and inserting ‘‘; and’’; and
(E) by adding at the end the following new subclause:
‘‘(V) an individual may obtain a subsequent consolidation loan under section 455(g) only for the purposes of

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obtaining an income contingent repayment plan, and only
if the loan has been submitted to the guaranty agency
for default aversion.’’; and
(2) in subsection (b)(5), by striking the first sentence and
inserting the following: ‘‘In the event that a lender with an
agreement under subsection (a)(1) of this section denies a
consolidation loan application submitted to the lender by an
eligible borrower under this section, or denies an application
submitted to the lender by such a borrower for a consolidation
loan with income-sensitive repayment terms, the Secretary
shall offer any such borrower who applies for it, a Federal
Direct Consolidation loan. The Secretary shall offer such a
loan to a borrower who has defaulted, for the purpose of
resolving the default.’’.
(b) REPEAL OF IN-SCHOOL CONSOLIDATION.—
(1)
DEFINITION
OF
REPAYMENT
PERIOD.—Section
428(b)(7)(A) (20 U.S.C. 1078(b)(7)(A)) is amended by striking
‘‘shall begin—’’ and all that follows through ‘‘earlier date.’’
and inserting the following: ‘‘shall begin the day after 6 months
after the date the student ceases to carry at least one-half
the normal full-time academic workload (as determined by the
institution).’’.
(2) CONFORMING CHANGE TO ELIGIBLE BORROWER DEFINITION.—Section
428C(a)(3)(A)(ii)(I)
(20
U.S.C.
1078–
3(a)(3)(A)(ii)(I)) is amended by inserting ‘‘as determined under
section 428(b)(7)(A)’’ after ‘‘repayment status’’.
(c) ADDITIONAL AMENDMENTS.—Section 428C (20 U.S.C. 1078–
3) is amended in subsection (a)(3), by striking subparagraph (C).
(d) CONFORMING AMENDMENTS TO DIRECT LOAN PROGRAM.—
Section 455 (20 U.S.C. 1087e) is amended—
(1) in subsection (a)(1) by inserting ‘‘428C,’’ after ‘‘428B,’’;
(2) in subsection (a)(2)—
(A) by striking ‘‘and’’ at the end of subparagraph (B);
(B) by redesignating subparagraph (C) as subparagraph (D); and
(C) by inserting after subparagraph (B) the following:
‘‘(C) section 428C shall be known as ‘Federal Direct
Consolidation Loans’; and ’’; and
(3) in subsection (g)—
(A) by striking the second sentence; and
(B) by adding at the end the following new sentences:
‘‘To be eligible for a consolidation loan under this part,
a borrower shall meet the eligibility criteria set forth in
section 428C(a)(3). The Secretary, upon application for such
a loan, shall comply with the requirements applicable to
a lender under section 428C(b)(1)(F).’’.
SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

Section 428G (20 U.S.C. 1078–7) is amended—
(1) in subsection (a)(3), by adding at the end the following:
‘‘Notwithstanding section 422(d) of the Higher Education
Amendments of 1998, this paragraph shall be effective beginning on the date of enactment of the Higher Education Reconciliation Act of 2005.’’;
(2) in subsection (b)(1), by adding at the end the following:
‘‘Notwithstanding section 422(d) of the Higher Education
Amendments of 1998, the second sentence of this paragraph

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120 STAT. 165

shall be effective beginning on the date of enactment of the
Higher Education Reconciliation Act of 2005.’’; and
(3) in subsection (e), by striking ‘‘, made to a student
to cover the cost of attendance at an eligible institution outside
the United States’’.
SEC. 8011. SCHOOL AS LENDER.

Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is
amended to read as follows:
‘‘(2) REQUIREMENTS FOR ELIGIBLE INSTITUTIONS.—
‘‘(A) IN GENERAL.—To be an eligible lender under this
part, an eligible institution—
‘‘(i) shall employ at least one person whose fulltime responsibilities are limited to the administration
of programs of financial aid for students attending
such institution;
‘‘(ii) shall not be a home study school;
‘‘(iii) shall not—
‘‘(I) make a loan to any undergraduate student;
‘‘(II) make a loan other than a loan under
section 428 or 428H to a graduate or professional
student; or
‘‘(III) make a loan to a borrower who is not
enrolled at that institution;
‘‘(iv) shall award any contract for financing, servicing, or administration of loans under this title on
a competitive basis;
‘‘(v) shall offer loans that carry an origination fee
or an interest rate, or both, that are less than such
fee or rate authorized under the provisions of this
title;
‘‘(vi) shall not have a cohort default rate (as defined
in section 435(m)) greater than 10 percent;
‘‘(vii) shall, for any year for which the institution
engages in activities as an eligible lender, provide for
a compliance audit conducted in accordance with section 428(b)(1)(U)(iii)(I), and the regulations thereunder,
and submit the results of such audit to the Secretary;
‘‘(viii) shall use any proceeds from special allowance payments and interest payments from borrowers,
interest subsidies received from the Department of
Education, and any proceeds from the sale or other
disposition of loans, for need-based grant programs;
and
‘‘(ix) shall have met the requirements of subparagraphs (A) through (F) of this paragraph as in effect
on the day before the date of enactment of the Higher
Education Reconciliation Act of 2005, and made loans
under this part, on or before April 1, 2006.
‘‘(B) ADMINISTRATIVE EXPENSES.—An eligible lender
under subparagraph (A) shall be permitted to use a portion
of the proceeds described in subparagraph (A)(viii) for
reasonable and direct administrative expenses.
‘‘(C) SUPPLEMENT, NOT SUPPLANT.—An eligible lender
under subparagraph (A) shall ensure that the proceeds
described in subparagraph (A)(viii) are used to supplement,

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PUBLIC LAW 109–171—FEB. 8, 2006
and not to supplant, non-Federal funds that would otherwise be used for need-based grant programs.’’.

SEC. 8012. REPAYMENT BY THE SECRETARY OF LOANS OF BANKRUPT,
DECEASED, OR DISABLED BORROWERS; TREATMENT OF
BORROWERS ATTENDING SCHOOLS THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED SCHOOLS, OR
FALSELY CERTIFIED AS ELIGIBLE TO BORROW.

Section 437 (20 U.S.C. 1087) is amended—
(1) in the section heading, by striking ‘‘CLOSED
SCHOOLS OR FALSELY CERTIFIED AS ELIGIBLE TO
BORROW’’ and inserting ‘‘SCHOOLS THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED SCHOOLS, OR
FALSELY CERTIFIED AS ELIGIBLE TO BORROW’’; and
(2) in the first sentence of subsection (c)(1), by inserting
‘‘or was falsely certified as a result of a crime of identity
theft’’ after ‘‘falsely certified by the eligible institution’’.
SEC. 8013. ELIMINATION OF TERMINATION DATES FROM TAXPAYERTEACHER PROTECTION ACT OF 2004.

Applicability.

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(a) EXTENSION OF LIMITATIONS ON SPECIAL ALLOWANCE FOR
LOANS FROM THE PROCEEDS OF TAX EXEMPT ISSUES.—Section
438(b)(2)(B) (20 U.S.C. 1087–1(b)(2)(B)) is amended—
(1) in clause (iv), by striking ‘‘and before January 1, 2006,’’;
and
(2) in clause (v)(II)—
(A) by striking ‘‘and before January 1, 2006,’’ each
place it appears in divisions (aa) and (bb); and
(B) by striking ‘‘, and before January 1, 2006’’ in division (cc).
(b) ADDITIONAL LIMITATION ON SPECIAL ALLOWANCE FOR LOANS
FROM THE PROCEEDS OF TAX EXEMPT ISSUES.—Section 438(b)(2)(B)
(20 U.S.C 1087–1(b)(2)(B)) is further amended by adding at the
end thereof the following new clauses:
‘‘(vi) Notwithstanding clauses (i), (ii), and (v), but subject
to clause (vii), the quarterly rate of the special allowance shall
be the rate determined under subparagraph (A), (E), (F), (G),
(H), or (I) of this paragraph, as the case may be, for a holder
of loans—
‘‘(I) that were made or purchased on or after the date
of enactment of the Higher Education Reconciliation Act
of 2005; or
‘‘(II) that were not earning a quarterly rate of special
allowance determined under clauses (i) or (ii) of subparagraph (B) of this paragraph (20 U.S.C. 1087–1(b)(2)(b))
as of the date of enactment of the Higher Education Reconciliation Act of 2005.
‘‘(vii) Clause (vi) shall be applied by substituting ‘December
31, 2010’ for ‘the date of enactment of the Higher Education
Reconciliation Act of 2005’ in the case of a holder of loans
that—
‘‘(I) was, as of the date of enactment of the Higher
Education Reconciliation Act of 2005, and during the
quarter for which the special allowance is paid, a unit
of State or local government or a nonprofit private entity;
‘‘(II) was, as of such date of enactment, and during
such quarter, not owned or controlled by, or under common
ownership or control with, a for-profit entity; and

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120 STAT. 167

‘‘(III) held, directly or through any subsidiary, affiliate,
or trustee, a total unpaid balance of principal equal to
or less than $100,000,000 on loans for which special allowances were paid under this subparagraph in the most
recent quarterly payment prior to September 30, 2005.’’.
(c) ELIMINATION OF EFFECTIVE DATE LIMITATION ON HIGHER
TEACHER LOAN FORGIVENESS BENEFITS.—
(1) TECHNICAL CLARIFICATION.—The matter preceding paragraph (1) of section 2 of the Taxpayer-Teacher Protection Act
of 2004 (Public Law 108–409; 118 Stat. 2299) is amended
by inserting ‘‘of the Higher Education Act of 1965’’ after ‘‘Section
438(b)(2)(B)’’.
(2) AMENDMENT.—Paragraph (3) of section 3(b) of the Taxpayer-Teacher Protection Act of 2004 (20 U.S.C. 1078–10 note)
is amended by striking ‘‘, and before October 1, 2005’’.
(3) EFFECTIVE DATES.—The amendment made by paragraph
(1) shall be effective as if enacted on October 30, 2004, and
the amendment made by paragraph (2) shall be effective as
if enacted on October 1, 2005.
(d) COORDINATION WITH SECOND HIGHER EDUCATION EXTENSION ACT OF 2005.—
(1) REPEAL.—Section 2 of the Second Higher Education
Extension Act of 2005 is amended by striking subsections (b)
and (c).
(2) EFFECT ON AMENDMENTS.—The amendments made by
subsections (a) and (c) of this section shall be effective as
if the amendments made in subsections (b) and (c) of section
2 of the Second Higher Education Extension Act of 2005 had
not been enacted.
(e) ADDITIONAL CHANGES TO TEACHER LOAN FORGIVENESS
PROVISIONS.—
(1) FFEL PROVISIONS.—Section 428J (20 U.S.C. 1078–10)
is amended—
(A) in subsection (b)(1)(B), by inserting after ‘‘1965’’
the following: ‘‘, or meets the requirements of subsection
(g)(3)’’; and
(B) in subsection (g), by adding at the end the following
new paragraph:
‘‘(3) PRIVATE SCHOOL TEACHERS.—An individual who is
employed as a teacher in a private school and is exempt from
State certification requirements (unless otherwise applicable
under State law), may, in lieu of the requirement of subsection
(b)(1)(B), have such employment treated as qualifying employment under this section if such individual is permitted to
and does satisfy rigorous subject knowledge and skills tests
by taking competency tests in the applicable grade levels and
subject areas. For such purposes, the competency tests taken
by such a private school teacher shall be recognized by 5
or more States for the purpose of fulfilling the highly qualified
teacher requirements under section 9101 of the Elementary
and Secondary Education Act of 1965, and the score achieved
by such teacher on each test shall equal or exceed the average
passing score of those 5 States.’’.
(2) DIRECT LOAN PROVISIONS.—Section 460 (20 U.S.C. 1087j)
is amended—

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20 USC 1087–1.

20 USC 1087–1
note.

20 USC 1087–1,
1078 note.
Effective date.
20 USC 1087–1
note.

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PUBLIC LAW 109–171—FEB. 8, 2006
(A) in subsection (b)(1)(A)(ii), by inserting after ‘‘1965’’
the following: ‘‘, or meets the requirements of subsection
(g)(3)’’; and
(B) in subsection (g), by adding at the end the following
new paragraph:
‘‘(3) PRIVATE SCHOOL TEACHERS.—An individual who is
employed as a teacher in a private school and is exempt from
State certification requirements (unless otherwise applicable
under State law), may, in lieu of the requirement of subsection
(b)(1)(A)(ii), have such employment treated as qualifying
employment under this section if such individual is permitted
to and does satisfy rigorous subject knowledge and skills tests
by taking competency tests in the applicable grade levels and
subject areas. For such purposes, the competency tests taken
by such a private school teacher shall be recognized by 5
or more States for the purpose of fulfilling the highly qualified
teacher requirements under section 9101 of the Elementary
and Secondary Education Act of 1965, and the score achieved
by such teacher on each test shall equal or exceed the average
passing score of those 5 States.’’.

SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

(a) INSURANCE PERCENTAGE.—
(1) AMENDMENT.—Subparagraph (G) of section 428(b)(1)
(20 U.S.C. 1078(b)(1)(G)) is amended to read as follows:
‘‘(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);’’.
(2) EFFECTIVE DATE OF AMENDMENT.—The amendment
made by this subsection shall apply with respect to loans for
which the first disbursement of principal is made on or after
July 1, 2006.
(b) FEDERAL DEFAULT FEES.—
(1) IN GENERAL.—Subparagraph (H) of section 428(b)(1)
(20 U.S.C. 1078(b)(1)(H)) is amended to read as follows:
‘‘(H) provides—
‘‘(i) for loans for which the date of guarantee of
principal is before July 1, 2006, for the collection of
a single insurance premium equal to not more than
1.0 percent of the principal amount of the loan, by
deduction proportionately from each installment payment of the proceeds of the loan to the borrower,
and ensures that the proceeds of the premium will
not be used for incentive payments to lenders; or
‘‘(ii) for loans for which the date of guarantee of
principal is on or after July 1, 2006, for the collection,

20 USC 1078
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and the deposit into the Federal Student Loan Reserve
Fund under section 422A of a Federal default fee of
an amount equal to 1.0 percent of the principal amount
of the loan, which fee shall be collected either by deduction from the proceeds of the loan or by payment
from other non-Federal sources, and ensures that the
proceeds of the Federal default fee will not be used
for incentive payments to lenders;’’.
(2) UNSUBSIDIZED LOANS.—Section 428H(h) (20 U.S.C.
1078–8(h)) is amended by adding at the end the following
new sentences: ‘‘Effective for loans for which the date of guarantee of principal is on or after July 1, 2006, in lieu of the
insurance premium authorized under the preceding sentence,
each State or nonprofit private institution or organization
having an agreement with the Secretary under section 428(b)(1)
shall collect and deposit into the Federal Student Loan Reserve
Fund under section 422A, a Federal default fee of an amount
equal to 1.0 percent of the principal amount of the loan, which
fee shall be collected either by deduction from the proceeds
of the loan or by payment from other non-Federal sources.
The Federal default fee shall not be used for incentive payments
to lenders.’’.
(3) VOLUNTARY FLEXIBLE AGREEMENTS.—Section 428A(a)(1)
(20 U.S.C. 1078–1(a)(1)) is amended—
(A) by striking ‘‘or’’ at the end of subparagraph (A);
(B) by striking the period at the end of subparagraph
(B) and inserting ‘‘; or’’; and
(C) by adding at the end the following new subparagraph:
‘‘(C) the Federal default fee required by section
428(b)(1)(H) and the second sentence of section 428H(h).’’.
(c) TREATMENT OF EXEMPT CLAIMS.—
(1) AMENDMENT.—Section 428(c)(1) (20 U.S.C. 1078(c)(1))
is amended—
(A) by redesignating subparagraph (G) as subparagraph (H), and moving such subparagraph 2 em spaces
to the left; and
(B) by inserting after subparagraph (F) the following
new subparagraph:
‘‘(G)(i) Notwithstanding any other provisions of this section,
in the case of exempt claims, the Secretary shall apply the
provisions of—
‘‘(I) the fourth sentence of subparagraph (A) by substituting ‘100 percent’ for ‘95 percent’;
‘‘(II) subparagraph (B)(i) by substituting ‘100 percent’
for ‘85 percent’; and
‘‘(III) subparagraph (B)(ii) by substituting ‘100 percent’
for ‘75 percent’.
‘‘(ii) For purposes of clause (i) of this subparagraph, the
term ‘exempt claims’ means claims with respect to loans for
which it is determined that the borrower (or the student on
whose behalf a parent has borrowed), without the lender’s
or the institution’s knowledge at the time the loan was made,
provided false or erroneous information or took actions that
caused the borrower or the student to be ineligible for all
or a portion of the loan or for interest benefits thereon.’’.

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20 USC 1078
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(2) EFFECTIVE DATE OF AMENDMENTS.—The amendments
made by this subsection shall apply with respect to loans for
which the first disbursement of principal is made on or after
July 1, 2006.
(d) CONSOLIDATION OF DEFAULTED LOANS.—Section 428(c) (20
U.S.C. 1078(c)) is further amended—
(1) in paragraph (2)(A)—
(A) by inserting ‘‘(i)’’ after ‘‘including’’; and
(B) by inserting before the semicolon at the end the
following: ‘‘and (ii) requirements establishing procedures
to preclude consolidation lending from being an excessive
proportion of guaranty agency recoveries on defaulted loans
under this part’’;
(2) in paragraph (2)(D), by striking ‘‘paragraph (6)’’ and
inserting ‘‘paragraph (6)(A)’’; and
(3) in paragraph (6)—
(A) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively;
(B) by inserting ‘‘(A)’’ before ‘‘For the purpose of paragraph (2)(D),’’; and
(C) by adding at the end the following new subparagraphs:
‘‘(B) A guaranty agency shall—
‘‘(i) on or after October 1, 2006—
‘‘(I) not charge the borrower collection costs in
an amount in excess of 18.5 percent of the outstanding
principal and interest of a defaulted loan that is paid
off through consolidation by the borrower under this
title; and
‘‘(II) remit to the Secretary a portion of the collection charge under subclause (I) equal to 8.5 percent
of the outstanding principal and interest of such
defaulted loan; and
‘‘(ii) on and after October 1, 2009, remit to the Secretary the entire amount charged under clause (i)(I) with
respect to each defaulted loan that is paid off with excess
consolidation proceeds.
‘‘(C) For purposes of subparagraph (B), the term ‘excess
consolidation proceeds’ means, with respect to any guaranty
agency for any Federal fiscal year beginning on or after October
1, 2009, the proceeds of consolidation of defaulted loans under
this title that exceed 45 percent of the agency’s total collections
on defaulted loans in such Federal fiscal year.’’.
(e) DOCUMENTATION OF FORBEARANCE AGREEMENTS.—Section
428(c) (20 U.S.C. 1078(c)) is further amended—
(1) in paragraph (3)(A)(i)—
(A) by striking ‘‘in writing’’; and
(B) by inserting ‘‘and documented in accordance with
paragraph (10)’’ after ‘‘approval of the insurer’’; and
(2) by adding at the end the following new paragraph:
‘‘(10) DOCUMENTATION OF FORBEARANCE AGREEMENTS.—For
the purposes of paragraph (3), the terms of forbearance agreed
to by the parties shall be documented by confirming the agreement of the borrower by notice to the borrower from the lender,
and by recording the terms in the borrower’s file.’’.
(f) VOLUNTARY FLEXIBLE AGREEMENTS.—Section 428A(a) (20
U.S.C. 1078–1(a)) is further amended—

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(1) in paragraph (1)(B), by striking ‘‘unless the Secretary’’
and all that follows through ‘‘designated guarantor’’;
(2) by striking paragraph (2);
(3) by redesignating paragraph (3) as paragraph (2); and
(4) by striking paragraph (4).
(g) FRAUD; REPAYMENT REQUIRED.—Section 428B(a)(1) (20
U.S.C. 1078–2(a)(1)) is further amended—
(1) by striking ‘‘and’’ at the end of subparagraph (A);
(2) by redesignating subparagraph (B) as subparagraph
(C); and
(3) by inserting after subparagraph (A) the following new
subparagraph:
‘‘(B) in the case of a graduate or professional student
or parent who has been convicted of, or has pled nolo
contendere or guilty to, a crime involving fraud in obtaining
funds under this title, such graduate or professional student or parent has completed the repayment of such funds
to the Secretary, or to the holder in the case of a loan
under this title obtained by fraud; and’’.
(h) DEFAULT REDUCTION PROGRAM.—Section 428F(a)(1) (20
U.S.C. 1078–6(a)(1)) is amended—
(1) in subparagraph (A), by striking ‘‘consecutive payments
for 12 months’’ and inserting ‘‘9 payments made within 20
days of the due date during 10 consecutive months’’;
(2) by redesignating subparagraph (C) as subparagraph
(D); and
(3) by inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) A guaranty agency may charge the borrower and
retain collection costs in an amount not to exceed 18.5
percent of the outstanding principal and interest at the
time of sale of a loan rehabilitated under subparagraph
(A).’’.
(i) EXCEPTIONAL PERFORMANCE INSURANCE RATE.—Section
428I(b)(1) (20 U.S.C. 1078–9(b)(1)) is amended—
(1) in the heading, by striking ‘‘100 PERCENT’’ and inserting
‘‘99 PERCENT’’; and
(2) by striking ‘‘100 percent of the unpaid’’ and inserting
‘‘99 percent of the unpaid’’.
(j) UNIFORM ADMINISTRATIVE AND CLAIMS PROCEDURE.—Section
432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is amended by inserting ‘‘and
anticipated graduation date’’ after ‘‘status change’’.
(1) Section 428(a)(3)(A)(v) (20 U.S.C. 1078(a)(3)(A)(v)) is
amended—
(A) by striking ‘‘or’’ at the end of subclause (I);
(B) by striking the period at the end of subclause
(II) and inserting ‘‘; or’’; and
(C) by adding after subclause (II) the following new
subclause:
‘‘(III) in the case of a loan disbursed through an escrow
agent, 3 days before the first disbursement of the loan.’’.
(2) Section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is amended
by striking ‘‘45 days’’ in the last sentence and inserting ‘‘30
days’’.
(3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is amended by
striking ‘‘21 days’’ in the third sentence and inserting ‘‘10
days’’.

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SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

Section 458 is amended to read as follows:

20 USC 1087h.

‘‘SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

‘‘(a) ADMINISTRATIVE EXPENSES.—
‘‘(1) MANDATORY FUNDS FOR FISCAL YEAR 2006.—For fiscal
year 2006, there shall be available to the Secretary, from funds
not otherwise appropriated, funds to be obligated for—
‘‘(A) administrative costs under this part and part B,
including the costs of the direct student loan programs
under this part; and
‘‘(B) account maintenance fees payable to guaranty
agencies under part B and calculated in accordance with
subsections (b) and (c),
not to exceed (from such funds not otherwise appropriated)
$820,000,000 in fiscal year 2006.
‘‘(2) AUTHORIZATION FOR ADMINISTRATIVE COSTS BEGINNING
IN FISCAL YEARS 2007 THROUGH 2011.—For each of the fiscal
years 2007 through 2011, there are authorized to be appropriated such sums as may be necessary for administrative
costs under this part and part B, including the costs of the
direct student loan programs under this part.
‘‘(3) CONTINUING MANDATORY FUNDS FOR ACCOUNT MAINTENANCE FEES.—For each of the fiscal years 2007 through 2011,
there shall be available to the Secretary, from funds not otherwise appropriated, funds to be obligated for account maintenance fees payable to guaranty agencies under part B and
calculated in accordance with subsection (b).
‘‘(4) ACCOUNT MAINTENANCE FEES.—Account maintenance
fees under paragraph (3) shall be paid quarterly and deposited
in the Agency Operating Fund established under section 422B.
‘‘(5) CARRYOVER.—The Secretary may carry over funds
made available under this section to a subsequent fiscal year.
‘‘(b) CALCULATION BASIS.—Account maintenance fees payable
to guaranty agencies under subsection (a)(3) shall not exceed the
basis of 0.10 percent of the original principal amount of outstanding
loans on which insurance was issued under part B.
‘‘(c) BUDGET JUSTIFICATION.—No funds may be expended under
this section unless the Secretary includes in the Department of
Education’s annual budget justification to Congress a detailed
description of the specific activities for which the funds made available by this section have been used in the prior and current years
(if applicable), the activities and costs planned for the budget year,
and the projection of activities and costs for each remaining year
for which administrative expenses under this section are made
available.’’.
SEC. 8016. COST OF ATTENDANCE.

Section 472 (20 U.S.C. 1087ll) is amended—
(1) by striking paragraph (4) and inserting the following:
‘‘(4) for less than half-time students (as determined by
the institution), tuition and fees and an allowance for only—
‘‘(A) books, supplies, and transportation (as determined
by the institution);
‘‘(B) dependent care expenses (determined in accordance with paragraph (8)); and

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‘‘(C) room and board costs (determined in accordance
with paragraph (3)), except that a student may receive
an allowance for such costs under this subparagraph for
not more than 3 semesters or the equivalent, of which
not more than 2 semesters or the equivalent may be
consecutive;’’;
(2) in paragraph (11), by striking ‘‘and’’ after the semicolon;
(3) in paragraph (12), by striking the period and inserting
‘‘; and’’; and
(4) by adding at the end the following:
‘‘(13) at the option of the institution, for a student in
a program requiring professional licensure or certification, the
one-time cost of obtaining the first professional credentials
(as determined by the institution).’’.
SEC. 8017. FAMILY CONTRIBUTION.

(a) FAMILY CONTRIBUTION FOR DEPENDENT STUDENTS.—
(1) AMENDMENTS.—Section 475 (20 U.S.C. 1087oo) is
amended—
(A) in subsection (g)(2)(D), by striking ‘‘$2,200’’ and
inserting ‘‘$3,000’’; and
(B) in subsection (h), by striking ‘‘35’’ and inserting
‘‘20’’.
(2) EFFECTIVE DATE.—The amendments made by paragraph
(1) shall apply with respect to determinations of need for periods
of enrollment beginning on or after July 1, 2007.
(b) FAMILY CONTRIBUTION FOR INDEPENDENT STUDENTS WITHOUT DEPENDENTS OTHER THAN A SPOUSE.—
(1) AMENDMENTS.—Section 476 (20 U.S.C. 1087pp) is
amended—
(A) in subsection (b)(1)(A)(iv)—
(i) in subclause (I), by striking ‘‘$5,000’’ and
inserting ‘‘$6,050’’;
(ii) in subclause (II), by striking ‘‘$5,000’’ and
inserting ‘‘$6,050’’; and
(iii) in subclause (III), by striking ‘‘$8,000’’ and
inserting ‘‘$9,700’’; and
(B) in subsection (c)(4), by striking ‘‘35’’ and inserting
‘‘20’’.
(2) EFFECTIVE DATE.—The amendments made by paragraph
(1) shall apply with respect to determinations of need for periods
of enrollment beginning on or after July 1, 2007.
(c) FAMILY CONTRIBUTION FOR INDEPENDENT STUDENTS WITH
DEPENDENTS OTHER THAN A SPOUSE.—
(1) AMENDMENT.—Section 477(c)(4) (20 U.S.C. 1087qq(c)(4))
is amended by striking ‘‘12’’ and inserting ‘‘7’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply with respect to determinations of need for periods
of enrollment beginning on or after July 1, 2007.
(d) REGULATIONS; UPDATED TABLES.—Section 478(b) (20 U.S.C.
1087rr(b)) is amended—
(1) in paragraph (1), by adding at the end the following:
‘‘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

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(as determined under the preceding sentence) or 5 percent.’’;
and
(2) in paragraph (2)—
(A) by striking ‘‘2000–2001’’ and inserting ‘‘2007–2008’’;
and
(B) by striking ‘‘1999’’ and inserting ‘‘2006’’.
(e) EMPLOYMENT EXPENSE ALLOWANCE.—Section 478(h) (20
U.S.C. 1087rr(h)) is amended—
(1) by striking ‘‘476(b)(4)(B),’’; and
(2) by striking ‘‘meals away from home, apparel and
upkeep, transportation, and housekeeping services’’ and
inserting ‘‘food away from home, apparel, transportation, and
household furnishings and operations’’.
SEC. 8018. SIMPLIFIED NEED TEST AND AUTOMATIC ZERO IMPROVEMENTS.

(a) AMENDMENTS.—Section 479 (20 U.S.C. 1087ss) is amended—
(1) in subsection (b)—
(A) in paragraph (1)—
(i) in subparagraph (A), by striking clause (i) and
inserting the following:
‘‘(i) the student’s parents—
‘‘(I) file, or are eligible to file, a form described
in paragraph (3);
‘‘(II) certify that the parents are not required
to file a Federal income tax return; or
‘‘(III) received, or the student received, benefits
at some time during the previous 12-month period
under a means-tested Federal benefit program as
defined under subsection (d); and’’; and
(ii) in subparagraph (B), by striking clause (i) and
inserting the following:
‘‘(i) the student (and the student’s spouse, if any)—
‘‘(I) files, or is eligible to file, a form described
in paragraph (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) received benefits at some time during
the previous 12-month period under a meanstested Federal benefit program as defined under
subsection (d); and’’; and
(B) in the matter preceding subparagraph (A) of paragraph (3), by striking ‘‘A student or family files a form
described in this subsection, or subsection (c), as the case
maybe, if the student or family, respectively, files’’ and
inserting ‘‘In the case of an independent student, the student, or in the case of a dependent student, the family,
files a form described in this subsection, or subsection
(c), as the case may be, if the student or family, as appropriate, files’’;
(2) in subsection (c)—
(A) in paragraph (1)—
(i) by striking subparagraph (A) and inserting the
following:
‘‘(A) the student’s parents—

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‘‘(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) received, or the student received, benefits
at some time during the previous 12-month period
under a means-tested Federal benefit program as
defined under subsection (d); and’’; and
(ii) by striking subparagraph (B) and inserting
the following:
‘‘(B) the sum of the adjusted gross income of the parents is less than or equal to $20,000; or’’; and
(B) in paragraph (2)—
(i) by striking subparagraph (A) and inserting the
following:
‘‘(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) received benefits at some time during the
previous 12-month period under a means-tested Federal benefit program as defined under subsection (d);
and’’; and
(ii) by striking subparagraph (B) and inserting
the following:
‘‘(B) the sum of the adjusted gross income of the student and spouse (if appropriate) is less than or equal to
$20,000.’’; and
(3) by adding at the end the following:
‘‘(d) DEFINITION OF MEANS-TESTED FEDERAL BENEFIT PROGRAM.—In this section, 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) the supplemental security income program under title
XVI of the Social Security Act (42 U.S.C. 1381 et seq.);
‘‘(2) the food stamp program under the Food Stamp Act
of 1977 (7 U.S.C. 2011 et seq.);
‘‘(3) 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) 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) 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) other programs identified by the Secretary.’’.
(b) EVALUATION OF SIMPLIFIED NEEDS TEST.—
(1) ELIGIBILITY GUIDELINES.—The Secretary of Education
shall regularly evaluate the impact of the eligibility guidelines
in subsections (b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A)

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PUBLIC LAW 109–171—FEB. 8, 2006
of section 479 of the Higher Education Act of 1965 (20 U.S.C.
1087ss(b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A)).
(2) MEANS-TESTED FEDERAL BENEFIT PROGRAM.—For each
3-year period, the Secretary of Education shall evaluate the
impact of including the receipt of benefits by a student or
parent under a means-tested Federal benefit program (as
defined in section 479(d) of the Higher Education Act of 1965
(20 U.S.C. 1087ss(d)) as a factor in determining eligibility under
subsections (b) and (c) of section 479 of the Higher Education
Act of 1965 (20 U.S.C. 1087ss(b) and (c)).

SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

(a) TREATING ACTIVE DUTY MEMBERS OF THE ARMED FORCES
INDEPENDENT STUDENTS.—Section 480(d)(3) (20 U.S.C.
1087vv(d)(3)) is amended by inserting before the semicolon at the
end the following: ‘‘or is currently serving on active duty in the
Armed Forces for other than training purposes’’.
(b) DEFINITION OF ASSETS.—Section 480(f)(1) (20 U.S.C.
1087vv(f)(1)) is amended by inserting ‘‘qualified education benefits
(except as provided in paragraph (3)),’’ after ‘‘tax shelters,’’.
(c) TREATMENT OF FAMILY OWNERSHIP OF SMALL BUSINESSES.—
Section 480(f)(2) (20 U.S.C. 1087vv(f)(2)) is amended—
(1) in subparagraph (A), by striking ‘‘or’’;
(2) in subparagraph (B), by striking the period at the
end and inserting ‘‘; or’’; and
(3) by adding at the end the following new subparagraph:
‘‘(C) a small business with not more than 100 full-time
or full-time equivalent employees (or any part of such a small
business) that is owned and controlled by the family.’’.
(d) ADDITIONAL DEFINITIONS.—Section 480(f) is further
amended by adding at the end the following new paragraphs:
‘‘(3) A qualified education benefit shall not be considered an
asset of a student for purposes of section 475.
‘‘(4) 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) the refund value of any tuition credits or certificates
purchased under a qualified education benefit; and
‘‘(B) in the case of a program in which contributions are
made to an account that is established for the purpose of
meeting the qualified higher education expenses of the designated beneficiary of the account, the current balance of such
account.
‘‘(5) In this subsection:
‘‘(A) The term ‘qualified education benefit’ means—
‘‘(i) a qualified tuition program (as defined in section
529(b)(1)(A) of the Internal Revenue Code of 1986) or other
prepaid tuition plan offered by a State; and
‘‘(ii) a Coverdell education savings account (as defined
in section 530(b)(1) of the Internal Revenue Code of 1986).
‘‘(B) The term ‘qualified higher education expenses’ has
the meaning given the term in section 529(e) of the Internal
Revenue Code of 1986.’’.
(e) DESIGNATED ASSISTANCE.—Section 480(j) (20 U.S.C.
1087vv(j)) is amended—
(1) in the subsection heading, by striking ‘‘; TUITION
PREPAYMENT PLANS’’;

AS

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(2) by striking paragraph (2);
(3) by redesignating paragraph (3) as paragraph (2); and
(4) by adding at the end the following new paragraph:
‘‘(3) Notwithstanding paragraph (1) and section 472, assistance
not received under this title may be excluded from both estimated
financial assistance and cost of attendance, if that assistance is
provided by a State and is designated by such State to offset
a specific component of the cost of attendance. If that assistance
is excluded from either estimated financial assistance or cost of
attendance, it shall be excluded from both.’’.
SEC. 8020. GENERAL PROVISIONS.

(a) ACADEMIC YEAR.—Paragraph (2) of section 481(a) (20 U.S.C.
1088(a)) is amended to read as follows:
‘‘(2)(A) For the purpose of any program under this title, the
term ‘academic year’ shall—
‘‘(i) require a minimum of 30 weeks of instructional time
for a course of study that measures its program length in
credit hours; or
‘‘(ii) require a minimum of 26 weeks of instructional time
for a course of study that measures its program length in
clock hours; and
‘‘(iii) require an undergraduate course of study to contain
an amount of instructional time whereby a full-time student
is expected to complete at least—
‘‘(I) 24 semester or trimester hours or 36 quarter credit
hours in a course of study that measures its program
length in credit hours; or
‘‘(II) 900 clock hours in a course of study that measures
its program length in clock hours.
‘‘(B) The Secretary may reduce such minimum of 30 weeks
to not less than 26 weeks for good cause, as determined by the
Secretary on a case-by-case basis, in the case of an institution
of higher education that provides a 2-year or 4-year program of
instruction for which the institution awards an associate or baccalaureate degree.’’.
(b) DISTANCE EDUCATION: ELIGIBLE PROGRAM.—Section 481(b)
(20 U.S.C. 1088(b)) is amended by adding at the end the following
new paragraphs:
‘‘(3) An otherwise eligible program that is offered in whole
or in part through telecommunications is eligible for the purposes
of this title if the program is offered by an institution, other than
a foreign institution, that has been evaluated and determined
(before or after the date of enactment of the Higher Education
Reconciliation Act of 2005) to have the capability to effectively
deliver distance education programs by an accrediting agency or
association that—
‘‘(A) is recognized by the Secretary under subpart 2 of
part H; and
‘‘(B) has evaluation of distance education programs within
the scope of its recognition, as described in section 496(n)(3).
‘‘(4) For purposes of this title, the term ‘eligible program’
includes an instructional program that, in lieu of credit hours
or clock hours as the measure of student learning, utilizes direct
assessment of student learning, or recognizes the direct assessment
of student learning by others, if such assessment is consistent
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results of the assessment. In the case of a program being determined
eligible for the first time under this paragraph, such determination
shall be made by the Secretary before such program is considered
to be an eligible program.’’.
(c) CORRESPONDENCE COURSES.—Section 484(l)(1) (20 U.S.C.
1091(l)(1)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘for a program of study of 1 year or
longer’’; and
(B) by striking ‘‘unless the total’’ and all that follows
through ‘‘courses at the institution’’; and
(2) by amending subparagraph (B) to read as follows:
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
to an institution or school described in section 3(3)(C) of
the Carl D. Perkins Vocational and Technical Education
Act of 1998.’’.
SEC. 8021. STUDENT ELIGIBILITY.

(a) FRAUD: REPAYMENT REQUIRED.—Section 484(a) (20 U.S.C.
1091(a)) is amended—
(1) by striking the period at the end of paragraph (5)
and inserting ‘‘; and’’; and
(2) by adding at the end the following new paragraph:
‘‘(6) if the student has been convicted of, or has pled nolo
contendere or guilty to, a crime involving fraud in obtaining
funds under this title, have completed the repayment of such
funds to the Secretary, or to the holder in the case of a loan
under this title obtained by fraud.’’.
(b) VERIFICATION OF INCOME DATE.—Paragraph (1) of section
484(q) (20 U.S.C. 1091(q)) is amended to read as follows:
‘‘(1) CONFIRMATION WITH IRS.—The Secretary of Education,
in cooperation with the Secretary of the Treasury, is authorized
to confirm with the Internal Revenue Service the information
specified in section 6103(l)(13) of the Internal Revenue Code
of 1986 reported by applicants (including parents) under this
title on their Federal income tax returns for the purpose of
verifying the information reported by applicants on student
financial aid applications.’’.
(c) SUSPENSION OF ELIGIBILITY FOR DRUG OFFENSES.—Section
484(r)(1) (20 U.S.C. 1091(r)(1)) is amended by striking everything
preceding the table and inserting the following:
‘‘(1) IN GENERAL.—A student who is convicted of any offense
under any Federal or State law involving the possession or
sale of a controlled substance for conduct that occurred during
a period of enrollment for which the student was receiving
any grant, loan, or work assistance under this title shall not
be eligible to receive any grant, loan, or work assistance under
this title from the date of that conviction for the period of
time specified in the following table:’’.
SEC. 8022. INSTITUTIONAL REFUNDS.

Section 484B (20 U.S.C. 1091b) is amended—
(1) in the matter preceding clause (i) of subsection (a)(2)(A),
by striking ‘‘a leave of’’ and inserting ‘‘1 or more leaves of’’;
(2) in subsection (a)(3)(B)(ii), by inserting ‘‘(as determined
in accordance with subsection (d))’’ after ‘‘student has completed’’;

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(3) in subsection (a)(3)(C)(i), by striking ‘‘grant or loan
assistance under this title’’ and inserting ‘‘grant assistance
under subparts 1 and 3 of part A, or loan assistance under
parts B, D, and E,’’;
(4) in subsection (a)(4), by amending subparagraph (A)
to read as follows:
‘‘(A) IN GENERAL.—After determining the eligibility of
the student for a late disbursement or post-withdrawal
disbursement (as required in regulations prescribed by the
Secretary), the institution of higher education shall contact
the borrower and obtain confirmation that the loan funds
are still required by the borrower. In making such contact,
the institution shall explain to the borrower the borrower’s
obligation to repay the funds following any such disbursement. The institution shall document in the borrower’s
file the result of such contact and the final determination
made concerning such disbursement.’’;
(5) in subsection (b)(1), by inserting ‘‘not later than 45
days from the determination of withdrawal’’ after ‘‘return’’;
(6) in subsection (b)(2), by amending subparagraph (C)
to read as follows:
‘‘(C) GRANT OVERPAYMENT REQUIREMENTS.—
‘‘(i) IN GENERAL.—Notwithstanding subparagraphs
(A) and (B), a student shall only be required to return
grant assistance in the amount (if any) by which—
‘‘(I) the amount to be returned by the student
(as determined under subparagraphs (A) and (B)),
exceeds
‘‘(II) 50 percent of the total grant assistance
received by the student under this title for the
payment period or period of enrollment.
‘‘(ii) MINIMUM.—A student shall not be required
to return amounts of $50 or less.’’;
(7) in subsection (d), by striking ‘‘(a)(3)(B)(i)’’ and inserting
‘‘(a)(3)(B)’’; and
(8) in subsection (d)(2), by striking ‘‘clock hours—’’ and
all that follows through the period and inserting ‘‘clock hours
scheduled to be completed by the student in that period as
of the day the student withdrew.’’.
SEC. 8023. COLLEGE ACCESS INITIATIVE.

Part G is further amended by inserting after section 485C
(20 U.S.C. 1092c) the following new section:
‘‘SEC. 485D. COLLEGE ACCESS INITIATIVE.

20 USC 1092e.

‘‘(a) STATE-BY-STATE INFORMATION.—The Secretary shall direct
each guaranty agency with which the Secretary has an agreement
under section 428(c) to provide to the Secretary the information
necessary for the development of Internet web links and access
for students and families to a comprehensive listing of the postsecondary education opportunities, programs, publications, Internet
web sites, and other services available in the States for which
such agency serves as the designated guarantor.
‘‘(b) GUARANTY AGENCY ACTIVITIES.—
‘‘(1) PLAN AND ACTIVITY REQUIRED.—Each guaranty agency
with which the Secretary has an agreement under section 428(c)
shall develop a plan, and undertake the activity necessary,
to gather the information required under subsection (a) and

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to make such information available to the public and to the
Secretary in a form and manner as prescribed by the Secretary.
‘‘(2) ACTIVITIES.—Each guaranty agency shall undertake
such activities as are necessary to promote access to postsecondary education for students through providing information
on college planning, career preparation, and paying for college.
The guaranty agency shall publicize such information and
coordinate such activities with other entities that either provide
or distribute such information in the States for which such
guaranty agency serves as the designated guarantor.
‘‘(3) FUNDING.—The activities required by this section may
be funded from the guaranty agency’s Operating Fund established pursuant to section 422B and, to the extent funds remain,
from earnings on the restricted account established pursuant
to section 422(h)(4).
‘‘(4) RULE OF CONSTRUCTION.—Nothing in this subsection
shall be construed to require a guaranty agency to duplicate
any efforts under way on the date of enactment of the Higher
Education Reconciliation Act of 2005 that meet the requirements of this section.
‘‘(c) ACCESS TO INFORMATION.—
‘‘(1) SECRETARY’S RESPONSIBILITY.—The Secretary shall
ensure the availability of the information provided, by the
guaranty agencies in accordance with this section, to students,
parents, and other interested individuals, through Internet web
links or other methods prescribed by the Secretary.
‘‘(2) GUARANTY AGENCY RESPONSIBILITY.—The guaranty
agencies shall ensure that the information required by this
section is available without charge in printed format for students and parents requesting such information.
‘‘(3) PUBLICITY.—Not later than 270 days after the date
of enactment of the Higher Education Reconciliation Act of
2005, the Secretary and guaranty agencies shall publicize the
availability of the information required by this section, with
special emphasis on ensuring that populations that are
traditionally underrepresented in postsecondary education are
made aware of the availability of such information.’’.

Deadline.

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

Section 488A(a)(1) (20 U.S.C. 1095a(a)(1)) is amended by
striking ‘‘10 percent’’ and inserting ‘‘15 percent’’.

Subtitle B—Pensions
SEC. 8101. INCREASES IN PBGC PREMIUMS.

(a) FLAT-RATE PREMIUMS.—
(1) SINGLE-EMPLOYER PLANS.—
(A) IN GENERAL.—Clause (i) of section 4006(a)(3)(A)
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1306(a)(3)(A)) is amended by striking ‘‘$19’’ and
inserting ‘‘$30’’.
(B) ADJUSTMENT FOR INFLATION.—Section 4006(a)(3)
of such Act (29 U.S.C. 1306(a)(3)) is amended by adding
at the end the following new subparagraph:
‘‘(F) For each plan year beginning in a calendar year after
2006, there shall be substituted for the premium rate specified

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