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

SEC. 414. ELIGIBILITY OF STUDENT BORROWERS AND TERMS OF FEDERALLY INSURED STUDENT LOANS. (a) Security and Endorsement.— Section 427(a)(2)(A) of the Act (20 U.S.C. 1077(a)(2)(A)) is amended to read as follows: “(A) is made without security and without endorsement;”. (b) Insured Loan Deferments.— Section 427(a)(2)(C) of the Act is amended to read as follows: “(C) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid, during any period— “(i) during which the borrower— “(I) is pursuing at least a half-time course of study as determined by an eligible institution; or “(II) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for individuals with disabilities approved by the Secretary, except that no borrower shall be eligible for a deferment under this clause, or a loan made under this part (other than a loan made under 428B or 428C), while serving in a medical internship or residency program; “(ii) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment; or “(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; and provides that any such period shall not be included in determining the 10-year period described in subparagraph (B);”. (c) Graduated Repayment.— Section 427 of the Act is amended— (1) in subsection (a)(2)— 106 STAT. 514 (A) by striking “and” at the end of subparagraph (G); (B) by redesignating subparagraph (H) as subparagraph (I); and (C) by inserting after subparagraph (G) the following: “(H) provides that, no more than 6 months prior to the date on which the borrower’s first payment on a loan is due, the lender shall offer the borrower the option of repaying the loan in accordance with a graduated or income-sensitive repayment schedule established by the lender and in accordance with the regulations of the Secretary; and”; and (2) in subsection (c), by striking “Minimum Repayment Rate.—The total of the payments” and inserting “Special Repayment Rules.—Except as provided in subsection (a)(2)(H), the total of the payments”. (d) Study Abroad.— Section 427(a)(3) of the Act is amended to read as follows: “(3) the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except— “(A) that nothing in this title shall be interpreted— “(i) to allow the Secretary to require checks to be made copayable to the institution and the borrower; or “(ii) to prohibit the disbursement of loan proceeds by means other than by check; and “(B) in the case of any 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, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney; and”. (e) Minimum Payment for Married Couples; Minimum Payment of Interest.— Section 427(c) of the Act is further amended by striking “, except that in the case of a husband and wife” and all that follows through “whichever is less” and inserting “(but in no instance less than the amount of interest due and payable)”.