AMENDMENTS TO SECTION 428.

SEC. 416. AMENDMENTS TO SECTION 428. (a) Federal Interest Subsidies.— (1) Requirements to receive subsidy.— Section 428(a)(2)(C) of the Act (20 U.S.C. 1078(a)(2)(C)) is amended— (A) by amending clause (i) to read as follows: “(i) a student’s estimated financial assistance means, for the period for which the loan is sought, the amount of assistance such student will receive under subpart 1 of part A (as determined in accordance with section 484(b)), subpart 3 of part A and parts C and E of this title, and any veterans’ education benefits paid because of enrollment in a postsecondary education institution, including veterans’ education benefits (as defined in section 480(c)), plus other scholarship, grant, or loan assistance”; and (B) by amending clause (ii) to read as follows: “(ii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F”. (2) Limitation on interest prior to first disbursement.— Section 428(a)(3)(A) of the Act is amended by adding at the end the following new clause: “(v) A lender may not receive interest on a loan for any period that precedes the date that is— “(I) in the case of a loan disbursed by check, 10 days before the first disbursement of the loan; or “(II) in the case of a loan disbursed by electronic funds transfer, 3 days before the first disbursement of the loan.”. 106 STAT. 517 (3) Loans that have not been consummated.— Section 428(a) of the Act is amended by inserting after paragraph (6) the following new paragraph: “(7) Loans that have not been consummated.— Lenders may not charge interest or receive interest subsidies or special allowance payments for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been completed.”. (b) Loan Amounts.— (1) Annual limits.— Section 428(b)(1)(A) of the Act is amended— (A) by inserting “or in a program of study abroad approved for credit by the eligible home institution at which such student is enrolled” after “at an eligible institution”; and (B) by striking clauses (i) through (in) and inserting the following: “(i) in the case of a student at an eligible institution who has not successfully completed the first year of a program of undergraduate education— “(I) $2,625, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); “(II) $1,750, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and “(III) $875, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; “(ii) in the case of a student who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate study— “(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); “(II) $2,325, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such academic year; and “(III) $1,175, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such academic year; “(iii) in the case of a student at an eligible institution who has successfully completed such first and second year but has not successfully completed the remainder of a program of undergraduate study— “(I) $5,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); “(II) $3,675, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and “(III) $1,825, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; and 106 STAT. 518 “(iv) in the case of a graduate or professional student (as defined in regulations of the Secretary) at an eligible institution, $8,500;”. (2) Aggregate limits.— Section 428(b)(1)(B) of the Act is amended by striking clauses (i) and (ii) and inserting the following: “(i) $23,000, 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, 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”. (c) Repayment Period Calculations; Income Sensitive Repayment.— (1) Amendment.— Subparagraphs (D) and (E) of section 428(b)(l) of the Act are amended to read as follows: “(D) provides that (i) the student borrower shall be entitled to accelerate without penalty the whole or any part of an insured loan, (ii) the repayment period of any insured loan may not exceed 10 years, and (iii) the note, or other written evidence of any loan, may contain such reasonable provisions relating to repayment in the event of default by the borrower as may be authorized by regulations of the Secretary in effect at the time such note or written evidence was executed, and shall contain a notice that repayment may, following a default by the borrower, be subject to repayment in accordance with the regulations required by subsection (m) if the Secretary has published the finding required by paragraph (2) of such subsection; “(E) subject to subparagraphs (D) and (L), and except as provided by subparagraph (M), provides that— “(i) not more than 6 months prior to the date on which the borrower’s first payment is due, the lender shall offer the borrower of a loan made, insured, or guaranteed under this section or section 428A, the option of repaying the loan in accordance with a graduated or income-sensitive repayment schedule established by the lender and in accordance with regulations of the Secretary; and “(ii) repayment of loans shall be in installments over a period of not less than 5 years (unless the student, during the 6 months immediately preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years commencing at the beginning of the repayment period determined under paragraph (7) of this subsection;”. 106 STAT. 519 (2) Definition of repayment period.— Section 428(b) of the Act is amended by adding at the end the following new paragraph: “(7) Repayment period.— (A) In the case of a loan made under section 427 or 428, the repayment period shall begin on the day immediately following the expiration of the 6-month period after the student ceases to carry at least one-half the normal full-time academic workload as determined by the institution, unless the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier point in time, and shall exclude any period of authorized deferment or forbearance. “(B) In the case of a loan made under section 428A or 428H, the repayment period shall begin on the day the loan is disbursed, or, if the loan is disbursed in multiple installments, on the day of the last such disbursement, and shall exclude any period of authorized deferment or forbearance. “(C) In the case of a loan made under section 428B or 428C, the repayment period shall begin on the day the loan is disbursed, and shall exclude any period of authorized deferment or forbearance.”. (d) Minimum Payment for Married Couples; Minimum Payment of Interest.— Section 428(b)(1)(L)(i) of the Act is 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)”. (e) Deferments.— (1) Amendment.— Section 428(b)(1)(M) of the Act is amended to read as follows: “(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) 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 disabled individuals approved by the Secretary, the except that no borrower shall be eligible for a deferment under this clause, or 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;”. (2) Definition of economic hardship.— Section 435 of the Act is amended by adding at the end the following new subsection: “(o) Economic Hardship.— 106 STAT. 520 “(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) the minimum wage rate described in section 6 of the Fair Labor Standards Act of 1938; or “(ii) an amount equal to 100 percent of the poverty line for a family of 2 as determined in accordance with section 673(2) of the Community Service Block Grant Act; or “(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)(B), the Secretary shall consider the borrower’s income and debt-to-income ratio as primary factors.”. (f) Disbursement.— Section 428(b)(l)(N) of the Act is amended by striking “except in the case of attendance at an institution outside the United States, the funds shall be delivered directly to the student;” and inserting “except in the case of students who are studying outside the United States in a program of study abroad that is approved for credit by the home institution at which the 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;”. (g) Consequences of LS&T Actions.— Section 428(b)(1)(T) is amended to read as follows: “(T) authorizes (i) the limitation of the total number of loans or volume of loans, made under this part to students attending a particular eligible institution during any academic year; and (ii) the limitation, suspension, or termination of the eligibility of an eligible institution if— “(I) such institution is ineligible for the emergency action, limitation, suspension, or termination of eligible institutions under regulations issued by the Secretary or is ineligible pursuant to criteria, rules, or regulations issued under the student loan insurance program which are substantially the same as regulations with respect to emergency action, limitation, suspension, or termination of such eligibility issued by the Secretary; “(II) there is a State constitutional prohibition affecting the eligibility of such an institution; “(III) such institution fails to make timely refunds to students as required by regulations issued by the Secretary or has not satisfied within 30 days of issuance a final judgment obtained by a student seeking such a refund; “(IV) such institution or an owner, director, or officer of such institution is found guilty in any criminal, civil, or administrative proceeding, or such institution or an owner, director, or officer of such institution is found liable in any civil or administrative proceeding, regarding the obtaining, maintenance, or disbursement 106 STAT. 521of State or Federal grant, loan, or work assistance funds; or “(V) such institution or an owner, director, or officer of such institution has unpaid financial liabilities involving the improper acquisition, expenditure, or refund of State or Federal financial assistance funds; except that, if a guaranty agency limits, suspends, or terminates the participation of an eligible institution, the Secretary shall apply that limitation, suspension, or termination to all locations of such institution, unless the Secretary finds, within 30 days of notification of the action by the guaranty agency, that the guaranty agency’s action did not comply with the requirements of this section;”. (h) Audits of Lenders.— Section 428(b)(1)(U) of the Act is amended— (1) in clause (i), by striking “and” at the end thereof; (2) by inserting before the semicolon at the end thereof the following: “, and (iii) for (I) a compliance audit of each lender at least once a year and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary, or (II) with regard to a lender that is audited under chapter 75 of title 31, United States Code, such audit shall be deemed to satisfy the requirements of subclause (I) for the period covered by such audit, except that the Secretary may waive the requirements of this clause (iii) if the lender submits to the Secretary the results of an audit conducted for other purposes that the Secretary determines provides the same information as the audits required by this clause;”. (i) Forbearance.— Section 428(b)(1)(V) of the Act is amended— (1) by striking out “and” at the end of clause (i); (2) in clause (ii), by inserting “or (ii)” after “clause (i)” each place such term appears; (3) by striking the period at the end of clause (ii) and inserting a semicolon; (4) by redesignating clause (ii) as clause (iv); and (5) by inserting after clause (i) the following new clauses: “(ii) provides that, if the borrower’s debt burden under this title equals or exceeds 20 percent of gross income and the borrower submits a written request, a lender shall grant the borrower forbearance of principal and interest (or principal only at the option of the borrower), and shall renew such forbearance at 12-month intervals for a period not to exceed 3 years, on such terms as are otherwise consistent with the regulations of the Secretary and set forth in writing by the parties to the loan; “(iii) provides that the form of forbearance granted by the lender for purposes of this subparagraph shall be the temporary cessation of payments, unless the borrower selects forbearance in the form of an extension of time for making payments, or smaller payments than were previously scheduled; and”. 106 STAT. 522 (j) Additional Guaranty Agreement Requirements.— Section 428(b)(l) of the Act is amended by striking subparagraphs (W) and (X) and inserting the following: “(W) provides authority for the guaranty agency to require a participation agreement between the guaranty agency and each eligible institution within the State in which it is designated, as a condition for guaranteeing loans made on behalf of students attending the institution; “(X) provides assurances that the agency will implement all requirements of the Secretary for uniform claims and procedures pursuant to section 432(1); and “(Y) provides information to the Secretary in accordance with section 428(c)(10) and maintains reserve funds determined by the Secretary to be sufficient in relation to such agency’s guarantee obligations.”. (k) Contents of Insurance Program Agreements.— Section 428(b)(2) of the Act is amended— (l) in subparagraph (C), by striking “, as the Secretary may reasonably require to carry out the Secretary’s functions under this part,” and inserting “, including financial information, as the Secretary may reasonably require to carry out the Secretary’s functions under this part and protect the financial interest of the United States,”; (2) in subparagraph (D)— (A) by striking “at least once every 2 years” in clause (i) and inserting “on at least an annual basis”; (B) by striking “and” at the end of clause (ii); (3) in subparagraph (E)— (A) by inserting “(i)” after the subparagraph designation; (B) by striking the period at the end thereof and inserting a semicolon and “and”; and (C) by adding at the end the following new clause: “(ii) provide that the lender (or the holder of the loan) shall, not later than 120 days after the borrower has left the eligible institution, notify the borrower of the date on which the repayment period begins; and”; and (4) inserting at the end thereof the following new subparagraph: “(F) provide that, if the sale, other transfer, or assignment of a loan made under this part to another holder will result in a change in the identity of the party to whom the borrower must send subsequent payments or direct any communications concerning the loans, then— “(i) the transferor and the transferee will be required, not later than 45 days from the date the transferee acquires a legally enforceable right to receive payment from the borrower on such loan, each to provide a separate notice to the borrower of— “(I) the sale or other transfer; “(II) the identity of the transferee; “(III) the name and address of the party to whom subsequent payments or communications must be sent; and “(IV) the telephone numbers of both the transferor and the transferee; and “(ii) the transferor will be required to notify the guaranty agency, and, upon the request of an institu-106 STAT. 523tion of higher education, the guaranty agency shall notify the last such institution the student attended prior to the beginning of the repayment period of any loan made under this part, of— “(I) any sale or other transfer of the loan to another holder; and “(II) the address and telephone number by which contact may be made with such other holder concerning repayment of the loan, except that this subparagraph (F) shall only apply if the borrower is in the grace period described in section 427(a)(2)(B) or 428(b)(7) or is in repayment status.”. (l) Guaranty Agency Incentive Payments.— Section 428(b)(3) of the Act is amended— (1) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively; and (2) by inserting after subparagraph (A) the following new subparagraph: “(B) offer, directly or indirectly, any premium, incentive payment, or other inducement to any lender, or any agent, employee, or independent contractor of any lender or guaranty agency, in order to administer or market loans made under this part (other than a loan made under section 428H or a loan made as part of a guaranty agency’s lender- of-last-resort program) for the purpose of securing the designation of that guaranty agency as the insurer of such loans;”. (m) Elimination of Teacher Deferment.— Section 428(b) of the Act is amended— (1) by striking paragraph (4); and (2) by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively. (n) Procedures for Deferments.— Section 428(b)(4) of the Act (as redesignated in subsection (m)) is amended by adding at the end thereof the following new sentence: “Requests for deferment of repayment of loans under this part by students engaged in graduate or postgraduate fellowship-supported study (such as pursuant to a Fulbright grant) outside the United States shall be approved until completion of the period of the fellowship.”. (o) Information From State Licensing Boards.— Section 428(b) of the Act is further amended by inserting after paragraph (5) (as redesignated in subsection (m)) the following new paragraph: “(6) State guaranty agency information request of state licensing boards.— Each guaranty agency is authorized to enter into agreements with each appropriate State licensing board under which the State licensing board, upon request, will furnish the guaranty agency with the address of a student borrower in any case in which the location of the student borrower is unknown or unavailable to the guaranty agency.”. (p) Guaranty Agency Agreements.— (1) Authority to enter into agreements.— Section 428(c)(1)(A) of the Act is amended by striking the period at the end and inserting a comma and “or later than 45 days after the guaranty agency discharges its insurance obligation on the loan.”. 106 STAT. 524 (2) Additional review of exceptional performance prohibited.— Section 428(c)(1) is amended by adding at the end the following new subparagraph: “(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 4281 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”. (3) Contents of guaranty agreements.— Section 428(c)(2) of the Act is amended— (A) by striking “and” at the end of subparagraph (F); (B) by redesignating subparagraph (G) as subparagraph (I); and (C) by inserting after subparagraph (F) the following new subparagraphs: “(G) shall prohibit the Secretary from making any reimbursement under this subsection to a guaranty agency when a default claim is based on an inability to locate the borrower, unless the guaranty agency, at the time of filing for reimbursement, demonstrates to the Secretary that diligent attempts have been made to locate the borrower through the use of reasonable skip-tracing techniques in accordance with regulations prescribed by the Secretary; and “(H) set forth assurances that— “(i) upon the request of an eligible institution, the guaranty agency shall, subject to clauses (ii) and (iii), furnish to the institution information with respect to students (including the names and addresses of such students) who received loans made, insured, or guaranteed under this part for attendance at the eligible institution and for whom preclaims assistance activities have been requested under subsection (1); “(ii) the guaranty agency may require the payment by the institution of a reasonable fee (as determined in accordance with regulations prescribed by the Secretary) for such information; and “(iii) the guaranty agency will require the institution to use such information only to assist the institution in reminding students of their obligation to repay student loans and shall prohibit the institution from disseminating the information for any other purpose”. (4) Forbearance.— Section 428(c)(3) of the Act is amended— (A) by striking “and” at the end of subparagraph (A); (B) by striking the period at the end of subparagraph (B) and inserting “; and”; (C) by inserting after subparagraph (B) the following new subparagraph: “(C) shall contain provisions that specify that the form of forbearance granted by the lender for purposes of this paragraph shall be the temporary cessation of payments, unless the borrower selects forbearance in the form of 106 STAT. 525an extension of time for making payments, or smaller payments than were previously scheduled.”; and (D) by striking the last sentence and inserting the following: “Guaranty agencies shall not be precluded from permitting the parties to such a loan from entering into a forbearance agreement solely because the loan is in default. The Secretary shall permit lenders to exercise administrative forbearances that do not require the agreement of the borrower, under conditions authorized by the Secretary. Such forbearances shall include (i) forbearances for borrowers who are delinquent at the time of the granting of an authorized period of deferment under section 428(b)(1)(M) or 427(a)(2)(C), and (ii) if the borrower is less than 60 days delinquent on such loans at the time of sale or transfer, forbearances for borrowers on loans which are sold or transferred.”. (5) New programs’ insurance percentage.— Section 428(c)(7) of the Act is amended— (A) in subparagraph (A)— (i) in the matter preceding clause (i), by striking “(1)(B)” and inserting “(1)(C)”; and (ii) in clause (i), by inserting “and ends before October 1, 1991” before the semicolon; (B) in subparagraph (B), by inserting “or (B)” after “(A)”; (C) by redesignating subparagraph (B) (as amended) as subparagraph (C); and (D) by inserting after subparagraph (A) the following new subparagraph: “(B) Notwithstanding the provisions of paragraph (1)(C), the Secretary may pay a guaranty agency 100 percent of the amount expended by such agency in discharge of such agency’s insurance obligation for any fiscal year which— “(i) begins on or after October 1, 1991; and “(ii) is the fiscal year in which such guaranty agency begins to actively carry on a student loan insurance program which is subject to a guaranty agreement under subsection (b) or is one of the 4 succeeding fiscal years.”. (6) Considerations in requiring assignment.— Section 428(c)(8) of the Act is amended by adding at the end the following new sentences: “Prior to making such determination for any guaranty agency, the Secretary shall, in consultation with the guaranty agency, develop criteria to determine whether such agency has made adequate collections efforts. In determining whether a guaranty agency’s collection efforts have met such criteria, the Secretary shall consider the agency’s record of success in collecting on defaulted loans, the age of the loans, and the amount of recent payments received on the loans.”. (7) Guaranty agency reserve level.— Section 428(c) of the Act is amended by adding at the end the following new paragraph: “(10) Guaranty agency reserve level.— (A) Each guaranty agency which has entered into an agreement with the Secretary pursuant to this subsection shall maintain a current minimum reserve level of at least .5 percent of the total attributable amount of all outstanding loans guaranteed by such agency for the fiscal year of the agency that begins in 1993. For 106 STAT. 526purposes of this paragraph, such total attributable amount does not include amounts of outstanding loans transferred to the guaranty agency from another guaranty agency pursuant to a plan of the Secretary in response to the insolvency of the latter such guaranty agency. The minimum reserve level shall increase to— “(i) .7 percent of such total attributable amount for the fiscal year of the agency that begins in 1994; “(ii) .9 percent of such total attributable amount for the fiscal year of the agency that begins in 1995; and “(iii) 1.1 percent of such total attributable amount for each fiscal year of the agency that begins on or after January 1, 1996. “(B) The Secretary shall collect, on an annual basis, information from each guaranty agency having an agreement under this subsection to enable the Secretary to evaluate the financial solvency of each such agency. The information collected shall include the level of such agency’s current reserves, cash disbursements and accounts receivable. “(C) If (i) any guaranty agency falls below the required minimum reserve level in any 2 consecutive years, (ii) any guaranty agency’s Federal reimbursement payments are reduced to 80 percent pursuant to section 428(c)(1)(B)(ii), or (iii) the Secretary determines that the administrative or financial condition of a guaranty agency jeopardizes such agency’s continued ability to perform its responsibilities under its guaranty agreement, then the Secretary shall require the guaranty agency to submit and implement a management plan acceptable to the Secretary within 30 working days of any such event. “(D) Each management plan described in subparagraph (C) shall include the means by which the guaranty agency will improve its financial and administrative condition to the required level within 18 months. “(E) The Secretary may terminate a guaranty agency’s agreement in accordance with subparagraph (F) if— “(i) a guaranty agency required to submit a management plan under this paragraph fails to submit a plan that is acceptable to the Secretary; “(ii) the Secretary determines that a guaranty agency has failed to improve substantially its administrative and financial condition; or “(iii) the Secretary determines that the guaranty agency is in danger of financial collapse. “(F) Except as provided in subparagraph (G), if a guaranty agency’s agreement under this subsection is terminated pursuant to subparagraph (E), then the Secretary shall assume responsibility for all functions of the guaranty agency under the loan insurance program of such agency. In performing such functions the Secretary is authorized to— “(i) permit the transfer of guarantees to another guaranty agency; “(ii) revoke the reinsurance agreement of the guaranty agency at a specified date, so as to require the merger, consolidation, or termination of the guaranty agency; “(iii) transfer guarantees to the Department of Education for the purpose of payment of such claims and process such claims using the claims standards of the guaranty 106 STAT. 527agency, if such standards are determined by the Secretary to be in compliance with this Act; “(iv) design and implement a plan to restore the guaranty agency’s viability; “(v) provide the guaranty agency with additional advance funds in accordance with section 422(c)(7) in order to meet immediate cash needs of the guaranty agency and ensure the uninterrupted payment of claims, with such restrictions on the use of such funds, as determined appropriate by the Secretary; or “(vi) take any other action the Secretary determines necessary to ensure the continued availability of loans made under this part to residents of the State or States in which the guaranty agency did business, the full honoring of all guarantees issued by the guaranty agency prior to the Secretary’s assumption of the functions of such agency, and the proper servicing of loans guaranteed by the guaranty agency prior to the Secretary’s assumption of the functions of such agency, and to avoid disruption of the student loan program. “(G) The Secretary may not take any action under subparagraph (E) or (F) against any guaranty agency that is backed by the full faith and credit of the State where such guaranty agency is the primary guarantor. “(H) The Secretary shall not take any action under subparagraph (E) or (F) without giving the guaranty agency notice and the opportunity for a hearing. “(I) Notwithstanding any other provision of law, the information transmitted to the Secretary pursuant to this paragraph shall be confidential and exempt from disclosure under section 552 of title 5, United States Code, relating to freedom of information, or any other Federal law. “(J) The Secretary, within 3 months after the end of each fiscal year, shall submit to the House Committee on Education and Labor and the Senate Committee on Labor and Human Resources a report specifying the Secretary’s assessment of the fiscal soundness of the guaranty agency system, together with recommendations for legislative changes, if necessary, for the maintenance of a strong guaranty agency system.”. (8) Conforming amendments.— Section 422(c) of the Act (20 U.S.C. 1072(c)) is amended— (A) in paragraph (5), by striking “Advances pursuant to this subsection” in paragraph (5) and inserting “Except as provided in paragraph (7), advances pursuant to this subsection”; and (B) by inserting, after paragraph (6), the following new paragraph: “(7) Emergency advances.— The Secretary is authorized to make advances, on terms and conditions satisfactory to the Secretary, to a guaranty agency in accordance with section 428(c)(10)(F)(v) in order to assist the agency in meeting its immediate cash needs and ensure the uninterrupted payment of default claims by lenders.”. (q) Administrative Cost Allowances.— Section 428(f)(1) of the Act is amended— (1) in subparagraph (A)(i), by striking “commercial lender” and inserting “eligible lender”; and (2) by adding at the end the following new subparagraph: 106 STAT. 528 “(C) No payment may be made under this paragraph for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been completed”. (r) Lenders-of-Last-Resort.— Subsection (j) of section 428 of the Act is amended— (1) by striking “(j) Lenders-of-Last-Resort.—” and inserting the following: “(j) Lenders-of-Last-Resort.— “(1) General requirement;.—” (2) by indenting the margin of the text of such subsection by 2 em spaces; and (3) by adding at the end the following new paragraphs: “(2) Rules and operating procedures.— The guaranty agency shall develop rules and operating procedures for the lender of last resort program designed to ensure that— “(A) the program establishes operating hours and methods of application designed to facilitate application by students; “(B) information about the availability of loans under the program is made available to institutions of higher education in the State; “(C) appropriate steps are taken to ensure that borrowers receiving loans under the program are appropriately counseled on their loan obligation; and “(D) the guaranty agency notifies the Secretary when the guaranty agency believes or has reason to believe that the Secretary may need to exercise the Secretary’s authority under section 439(q). “(3) Limitation on lender-of-last-resort program.— (A) Subject to the provisions of subparagraphs (B) and (C), a guaranty agency or eligible lender is not required to make loans described in this section for attendance at an institution which— “(i) has a cohort default rate, as defined in section 435(m), which exceeds 25 percent for the most recent year for which a rate has been calculated by the Secretary; “(ii) has not been eligible for, and has not participated in, the loan program under this part during the most recent 18 consecutive months; or “(iii) is currently subject to an emergency action or limitation, suspension, or termination proceeding of any guaranty agency or the Secretary. “(B) Until July 1, 1994, this paragraph shall not apply to any institution that is— “(i) a part B institution within the meaning of section 322(2) of this Act; “(ii) a tribally controlled community college within the meaning of section 2(a)(4) of the Tribally Controlled Community College Assistance Act of 1978; or “(iii) a Navajo Community College under the Navajo Community College Act. “(C) Notwithstanding the provisions of subparagraph (A), the Secretary may require a guaranty agency or other eligible lender to make loans described in this section for attendance at an institution if there are, in the judgment of the Secretary, 106 STAT. 529exceptional mitigating circumstances that would make the application of this paragraph inequitable.”. (s) Information on Defaults.— Section 428(k) of the Act is amended by adding at the end the following new paragraph: “(3) Borrower location information.— Any information provided by the institution relating to borrower location shall be used by the guaranty agency in conducting required skip tracing activities. . (t) Income Contingent Repayment.— Section 428 of the Act is amended by adding at the end the following new subsection: “(m) Income Contingent Repayment.— “(1) Establishment of terms and conditions.— The Secretary may establish by regulation terms and conditions requiring the income contingent repayment of loans that are required to be repaid under this subsection. Such regulations shall specify the schedules under which the borrower’s income will be assessed for repayment of loans, shall permit the discharge of remaining obligation on the loan not later than 25 years after the commencement of income contingent repayment, and may provide for the potential collection of amounts in excess of the principal and interest owed on the original loan or loans. “(2) Collection mechanism.— The Secretary shall, to the extent funds are available therefor, enter into one or more contracts or other agreements with private firms or other agencies of the Government as necessary to carry out the purposes of this subsection. The regulations required by paragraph (1) shall not be effective unless the Secretary publishes a finding that— “(A) the Secretary has, pursuant to this paragraph, established a collection mechanism that will provide a high degree of certainty that collections will be made in accordance with the repayment option established under paragraph (1); and “(B) the use of such repayment option and collection mechanism will result in an increase in the net amount the Government will collect. “(3) Loans for which income contingent repayment is required.— A loan made under this part (other than under section 428B) is required to be repaid under this section if— “(A) the note or other evidence of the loan contains a notice that it is subject to repayment under this subsection; “(B) the note or other evidence of the loan has been assigned to the Secretary for collection pursuant to subsection (c)(8); and “(C) the Secretary has published the finding required by paragraph (2) of this subsection. “(4) Additional authority.— The Secretary is authorized to prescribe such regulations as are necessary to carry out the purposes of this subsection and to protect the Federal fiscal interest.”.