DEFINITIONS FOR STUDENT LOAN INSURANCE PROGRAM.

SEC. 427. DEFINITIONS FOR STUDENT LOAN INSURANCE PROGRAM. (a) Eligible Institution.— Section 435(a) of the Act (20 U.S.C. 1085) is amended— (1) by striking paragraphs (1) and (2) and inserting the following: “(1) In general.— Except as provided in paragraph (2), the term ‘eligible institution’ means an institution of higher education, as defined in section 481, except that, for the purposes of sections 427(a)(2)(C)(i) and 428(b)(1)(M)(i), an eligible institution includes any institution that is within this definition without regard to whether such institution is participating in any program under this title and includes any institution ineligible for participation in any program under this part pursuant to paragraph (2) of this subsection.”; (2) by redesignating paragraph (3) as paragraph (2); (3) in paragraph (2)(B) (as redesignated)— (A) in clause (i), by striking “and” at the end thereof; (B) in clause (ii), by striking “any succeeding fiscal year.” and inserting “fiscal year 1993; and”; and (C) by inserting at the end the following new clause: “(iii) 25 percent for any succeeding fiscal year.”. (b) Repeal of Separate Definition of Institution of Higher Education.— (1) Amendment.— Subsection (b) of section 435 of the Act is repealed. (2) Reference.— With respect to reference in any other provision of law to the definition of institution of higher education contained in section 435(b) of the Act, such provision shall be deemed to refer to section 481(a) of the Act. (c) Repeal of Definition of Vocational School.— Subsection (c) of section 435 of the Act is repealed. (d) Eligible Lender.— Section 435(d) of the Act is amended— (1) in paragraph (1)(A)— (A) in the matter preceding clause (i), by striking “a trust company,”; and (B) in clause (ii)— (i) by inserting at the end of subclause (I) the following: “or a bank which is subject to examination and supervision by an agency of the United States, makes student loans as a trustee pursuant to an express trust, operated as a lender under this part prior to January 1, 1975, and which meets the requirements of this provision prior to the enactment of the Higher Education Amendments of 1992, or”; and (ii) by striking “, or (III)” and all that follows through “January 1, 1981;” and inserting a semicolon; and (2) in paragraph (2)— (A) in subparagraph (C), by striking “institutions; and” and inserting “institution;”; 106 STAT. 550 (B) by inserting “and” after the semicolon at the end of subparagraph (D); and (C) by inserting after subparagraph (D) the following new subparagraphs: “(E) shall not have a cohort default rate (as defined in section 435(m)) greater than 15 percent; and “(F) shall use the proceeds from special allowance payments and interest payments from borrowers for need-based grant programs, except for reasonable reimbursement for direct administrative expenses;”. (e) Due Diligence.— Section 435(f) of the Act is amended by inserting “servicing and” before “collection practices”. (f) Repeal of Additional Definitions.— Section 435 of the Act is further amended by striking subsections (g), (h), and (n). (g) Definition of Cohort Default Rate.— Section 435(m) of the Act is amended to read as follows: “(m) Cohort Default Rate.— “(1) In general.— (A) Except as provided in paragraph (2), the term ‘cohort default rate’ means, for any fiscal year in which 30 or more current and former students at the institution enter repayment on loans under section 428 or 428A received for attendance at the institution, the percentage of those current and former students who enter repayment on such loans received for attendance at that institution in that fiscal year who default before the end of the following fiscal year. “(B) In determining the number of students who default before the end of such fiscal year, the Secretary shall include only loans for which the Secretary or a guaranty agency has paid claims for insurance, and, in calculating the cohort default rate, exclude any loans which, due to improper servicing or collection, would result in an inaccurate or incomplete calculation of the cohort default rate. “(C) For any fiscal year in which fewer than 30 of the institution’s current and former students enter repayment, the term ‘cohort default rate’ means the percentage of such current and former students who entered repayment on such loans in any of the three most recent fiscal years, who default before the end of the fiscal year immediately following the year in which they entered repayment. “(2) Special rules.— (A) In the case of a student who has attended and borrowed at more than one school, the student (and such student’s subsequent repayment or default) is attributed to each school for attendance at which the student received a loan that entered repayment in the fiscal year. “(B) A loan on which a payment is made by the school, such school’s owner, agent, contractor, employee, or any other entity or individual affiliated with such school, in order to avoid default by the borrower, is considered as m default for purposes of this subsection. “(C) Any loan which has been rehabilitated before the end of such following fiscal year is not considered as in default for the purposes of this subsection. “(D) For the purposes of this subsection, a loan made in accordance with section 428A shall not be considered to enter repayment until after the borrower has ceased to be enrolled in a course of study leading to a degree or certificate at an eligible institution on at least a half-time basis (as determined 106 STAT. 551by the institution) and ceased to be in a period of forbearance based on such enrollment. Each eligible lender of a loan made under section 428A shall provide the guaranty agency with the information necessary to determine when the loan entered repayment for purposes of this subsection, and the guaranty agency shall provide such information to the Secretary. “(3) Regulations to prevent evasions.— The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that institution of a default rate determination under this subsection through the use of such measures as branching, consolidation, change of ownership or control, or any similar device.”.