FEDERAL DIRECT STUDENT LOAN PROGRAM.

SEC. 4021. FEDERAL DIRECT STUDENT LOAN PROGRAM. Part D of title IV (20 U.S.C. 1087a) is amended to read as follows: “PART D— FEDERAL DIRECT STUDENT LOAN PROGRAM “SEC. 451. PROGRAM AUTHORITY. There are hereby made available, in accordance with the provisions of this part, such sums as may be necessary to make loans to all eligible students (and the eligible parents of such students) in attendance at participating institutions of higher education selected by the Secretary, to enable such students to pursue their courses of study at such institutions during the period beginning July 1, 1994. Such loans shall be made by participating institutions, or consortia thereof, that have agreements with the Secretary to originate loans, or by alternative originators designated by the Secretary to make loans for students in attendance at participating institutions (and their parents). “SEC. 452. FUNDS FOR ORIGINATION OF DIRECT STUDENT LOANS. “(a) In General.— The Secretary shall provide, on the basis of the need and the eligibility of students at each participating institution, and parents of such students, for such loans, funds for student and parent loans under this part— “(1) directly to an institution of higher education that has an agreement with the Secretary under section 454(a) to participate in the direct student loan programs under this part and that also has an agreement with the Secretary under section 454(b) to originate loans under this part; or “(2) through an alternative originator designated by the Secretary to students (and parents of students) attending institutions of higher education that have an agreement with the Secretary under section 454(a) but that do not have an agreement with the Secretary under section 454(b). “(b) Fees for Origination Services.— “(1) Fees for institutions.— The Secretary shall pay fees to institutions of higher education (or a consortium of such institutions) with agreements under section 454(b), in an amount established by the Secretary, to assist in meeting the costs of loan origination. Such fees— 107 STAT. 342 “(A) shall be paid by the Secretary based on all the loans made under this part to a particular borrower in the same academic year; “(B) shall be subject to a sliding scale that decreases the per borrower amount of such fees as the number of borrowers increases; and “(C) (i) for academic year 1994–1995, shall not exceed a program-wide average of $10 per borrower for all the loans made under this part to such borrower in the same academic year, and “(ii) for succeeding academic years, shall not exceed such average fee as the Secretary shall establish pursuant to regulations. “(2) Fees for alternative originators.— The Secretary shall pay fees for loan origination services to alternative originators of loans made under this part in an amount established by the Secretary in accordance with the terms of the contract described in section 456(b) between the Secretary and each such alternative originator. “(c) No Entitlement To Participate or Originate.— No institution of higher education shall have a right to participate in the programs authorized by this part, to originate loans, or to perform any program function under this part. Nothing in this subsection shall be construed so as to limit the entitlement of an eligible student attending a participating institution (or the eligible parent of such student) to borrow under this part. “(d) Delivery of Loan Funds.— Loan funds shall be paid and delivered to an institution by the Secretary prior to the beginning of the payment period established by the Secretary in a manner that is consistent with payment and delivery of basic grants under subpart 1 of part A of this title. “SEC. 453. SELECTION OF INSTITUTIONS FOR PARTICIPATION AND ORIGINATION. “(a) Phase-In of Program.— “(1) General authority.— The Secretary shall enter into agreements pursuant to section 454(a) with institutions of higher education to participate in the direct student loan program under this part, and agreements pursuant to section 454(b) with institutions of higher education, or consortia thereof, to originate loans in such program, for academic years beginning on or after July 1, 1994. Alternative origination services, through which an entity other than the participating institution at which the student is in attendance originates the loan, shall be provided by the Secretary, through 1 or more contracts under section 456(b) or such other means as the Secretary may provide, for students attending participating institutions that do not originate direct student loans under this part. Such agreements for the academic year 1994–1995 shall, to the extent feasible, be entered into not later than January 1, 1994. “(2) Transition provisions.— In order to ensure an expeditious but orderly transition from the loan programs under part B of this title to the direct student loan program under this part, the Secretary shall, in the exercise of the Secretary’s discretion, determine the number of institutions with which the Secretary shall enter into agreements under subsections 107 STAT. 343(a) and (b) of section 454 for any academic year, except that the Secretary shall exercise such discretion so as to achieve the following goals: “(A) for academic year 1994–1995, loans made under this part shall represent 5 percent of the new student loan volume for such year; “(B) for academic year 1995–1996, loans made under this part shall represent 40 percent of the new student loan volume for such year; “(C) for academic years 1996–1997 and 1997–1998, loans made under this part shall represent 50 percent of the new student loan volume for such years; and “(D) for the academic year that begins in fiscal year 1998, loans made under this part shall represent 60 percent of the new student loan volume for such year. “(3) Exception.— The Secretary may exceed the percentage goals described in subparagraphs (C) or (D) of paragraph (2) if the Secretary determines that a higher percentage is warranted by the number of institutions of higher education that desire to participate in the program under this part and that meet the eligibility requirements for such participation. “(4) New student loan volume.— For the purpose of this subsection, the term ‘new student loan volume’ means the estimated sum of all loans (other than consolidation loans) that will be made, insured or guaranteed under this part and part B in the year for which the determination is made. The Secretary shall base the estimate described in the preceding sentence on the most recent program data available. “(b) Selection Criteria.— “(1) Application.— Each institution of higher education desiring to participate in the direct student loan program under this part shall submit an application satisfactory to the Secretary containing such information and assurances as the Secretary may require. “(2) Selection procedure.— The Secretary shall select institutions for participation in the direct student loan program under this part, and shall enter into agreements with such institutions under section 454(a), from among those institutions that submit the applications described in paragraph (1), and meet such other eligibility requirements as the Secretary shall prescribe, by, to the extent possible— “(A) (i) categorizing such institutions according to anticipated loan volume, length of academic program, control of the institution, highest degree offered, size of student enrollment, geographic location, annual loan volume, and default experience; and “(ii) beginning in academic year 1995–1996 selecting institutions that are reasonably representative of each of the categories described pursuant to clause (i); and “(B) if the Secretary determines it necessary to carry out the purposes of this part, selecting additional institutions. “(c) Selection Criteria for Origination.— “(1) In general.— The Secretary may enter into a supplemental agreement with an institution (or a consortium of such institutions) that— “(A) has an agreement under subsection 454(a); 107 STAT. 344 “(B) desires to originate loans under this part; and “(C) meets the criteria described in paragraph (2). “(2) Transition selection criteria.— For academic year 1994–1995, the Secretary may approve an institution to originate loans only if such institution— “(A) made loans under part E of this title in academic year 1993–1994 and did not exceed the applicable maximum default rate under section 462(g) for the most recent fiscal year for which data are available; “(B) is not on the reimbursement system of payment for any of the programs under subpart 1 or 3 of part A, part C, or part E of this title; “(C) is not overdue on program or financial reports or audits required under this title; “(D) is not subject to an emergency action, or a limitation, suspension, or termination under section 428(b)(1)(T), 432(h), or 487(c); “(E) in the opinion of the Secretary, has not had significant deficiencies identified by a State postsecondary review entity under subpart 1 of part H of this title; “(F) in the opinion of the Secretary, has not had severe performance deficiencies for any of the programs under this title, including such deficiencies demonstrated by audits or program reviews submitted or conducted during the 5 calendar years immediately preceding the date of application; “(G) provides an assurance that such institution has no delinquent outstanding debts to the Federal Government, unless such debts are being repaid under or in accordance with a repayment arrangement satisfactory to the Federal Government, or the Secretary in the Secretary’s discretion determines that the existence or amount of such debts has not been finally determined by the cognizant Federal agency; and “(H) meets such other criteria as the Secretary may establish to protect the financial interest of the United States and to promote the purposes of this part. “(3) Regulations governing approval after transition.— For academic year 1995–1996 and subsequent academic years, the Secretary shall promulgate and publish in the Federal Register regulations governing the approval of institutions to originate loans under this part in accordance with section 457(a)(2). “(d) Eligible Institutions.— The Secretary may not select an institution of higher education for participation under this section unless such institution is an eligible institution under section 435(a). “(e) Consortia.— Subject to such requirements as the Secretary may prescribe, eligible institutions of higher education (as determined under subsection (d)) with agreements under section 454(a) may apply to the Secretary as consortia to originate loans under this part for students in attendance at such institutions. Each such institution shall be required to meet the requirements of subsection (c) with respect to loan origination. 107 STAT. 345 “SEC. 454. AGREEMENTS WITH INSTITUTIONS. “(a) Participation Agreements.— An agreement with any institution of higher education for participation in the direct student loan program under this part shall— “(1) provide for the establishment and maintenance of a direct student loan program at the institution under which the institution will— “(A) identify eligible students who seek student financial assistance at such institution in accordance with section 484; “(B) estimate the need of each such student as required by part F of this title for an academic year, except that, any loan obtained by a student under this part with the same terms as loans made under section 428H (except as otherwise provided in this part), or a loan obtained by a parent under this part with the same terms as loans made under section 428B (except as otherwise provided in this part), or obtained under any State-sponsored or private loan program, may be used to offset the expected family contribution of the student for that year; “(C) provide a statement that certifies the eligibility of any student to receive a loan under this part that is not in excess of the annual or aggregate limit applicable to such loan, except that the institution may, in exceptional circumstances identified by the Secretary, refuse to certify a statement that permits a student to receive a loan under this part, or certify a loan amount that is less than the student’s determination of need (as determined under part F of this title), if the reason for such action is documented and provided in written form to such student; “(D) set forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 428G; and “(E) provide timely and accurate information— “(i) concerning the status of student borrowers (and students on whose behalf parents borrow under this part) while such students are in attendance at the institution and concerning any new information of which the institution becomes aware for such students (or their parents) after such borrowers leave the institution, to the Secretary for the servicing and collecting of loans made under this part; and “(ii) if the institution does not have an agreement with the Secretary under subsection (b), concerning student eligibility and need, as determined under subparagraphs (A) and (B), to the Secretary as needed for the alternative origination of loans to eligible students and parents in accordance with this part; “(2) provide assurances that the institution will comply with requirements established by the Secretary relating to student loan information with respect to loans made under this part; “(3) provide that the institution accepts responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement; “(4) provide that students at the institution and their parents (with respect to such students) will be eligible to partici-107 STAT. 346pate in the programs under part B of this title at the discretion of the Secretary for the period during which such institution participates in the direct student loan program under this part, except that a student or parent may not receive loans under both this part and part B for the same period of enrollment; “(5) provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with institutions of higher education, to ensure that the institution is complying with program requirements and meeting program objectives; “(6) provide that the institution will not charge any fees of any kind, however described, to student or parent borrowers for origination activities or the provision of any information necessary for a student or parent to receive a loan under this part, or any benefits associated with such loan; and “(7) include such other provisions as the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of this part. “(b) Origination.— An agreement with any institution of higher education, or consortia thereof, for the origination of loans under this part shall— “(1) supplement the agreement entered into in accordance with subsection (a); “(2) include provisions established by the Secretary that are similar to the participation agreement provisions described in paragraphs (1)(E)(ii), (2), (3), (4), (5), (6), and (7) of subsection (a), as modified to relate to the origination of loans by the institution or consortium; “(3) provide that the institution or consortium will originate loans to eligible students and parents in accordance with this part; and “(4) provide that the note or evidence of obligation on the loan shall be the property of the Secretary. “(c) Withdrawal and Termination Procedures.— The Secretary shall establish procedures by which institutions or consortia may withdraw or be terminated from the program under this part. “SEC. 455. TERMS AND CONDITIONS OF LOANS. “(a) In General.— “(1) Parallel terms, conditions, benefits, and amounts.—Unless otherwise specified in this part, loans made to borrowers under this part shall have the same terms, conditions, and benefits, and be available in the same amounts, as loans made to borrowers under sections 428, 428B, and 428H of this title. “(2) Designation of loans.— Loans made to borrowers under this part that, except as otherwise specified in this part, have the same terms, conditions, and benefits as loans made to borrowers under— “(A) section 428 shall be known as ‘Federal Direct Stafford Loans’; “(B) section 428B shall be known as ‘Federal Direct PLUS Loans’; and “(C) section 428H shall be known as Federal Direct Unsubsidized Stafford Loans’. “(b) Interest Rate.— 107 STAT. 347 “(1) Rates for fdsl and fdusl.— For Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— “(A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus “(B) 3.1 percent, except that such rate shall not exceed 8.25 percent. “(2) In school and grace period rules.— (A) Notwithstanding the provisions of paragraph (1), but subject to paragraph (3), with respect to any Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on or after July 1, 1995, the applicable rate of interest for interest which accrues— “(i) prior to the beginning of the repayment period of the loan; or “(ii) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section 428(b)(1)(M) or 427(a)(2)(C), shall not exceed the rate determined under subparagraph (B). “(B) For the purpose of subparagraph (A), the rate determined under this subparagraph shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— “(i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction prior to such June 1; plus “(ii) 2.5 percent, except that such rate shall not exceed 8.25 percent. “(3) Out-year rule.— Notwithstanding paragraphs (1) and (2), for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— “(A) the bond equivalent rate of the security with a comparable maturity as established by the Secretary; plus “(B) 1.0 percent, except that such rate shall not exceed 8.25 percent. “(4) Rates for fdplus.— (A) For Federal Direct PLUS Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— “(i) the bond equivalent rate of 52-week Treasury bills auctioned at final auction held prior to such June 1; plus “(ii) 3.1 percent, except that such rate shall not exceed 9 percent. “(B) For Federal Direct PLUS loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— “(i) the bond equivalent rate of the security with a comparable maturity as established by the Secretary; plus 107 STAT. 348 “(ii) 2.1 percent, except that such rate shall not exceed 9 percent. “(5) Publication.— The Secretary shall determine the applicable rates of interest under this subsection after consultation with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. “(c) Loan Fee.— The Secretary shall charge the borrower of a loan made under this part an origination fee of 4.0 percent of the principal amount of loan. “(d) Repayment Plans.— “(1) Design and selection.— Consistent with criteria established by the Secretary, the Secretary shall offer a borrower of a loan made under this part a variety of plans for repayment of such loan, including principal and interest on the loan. The borrower shall be entitled to accelerate, without penalty, repayment on the borrower’s loans under this part. The borrower may choose— “(A) a standard repayment plan, with a fixed annual repayment amount paid over a fixed period of time, consistent with subsection (a)(1) of this section; “(B) an extended repayment plan, with a fixed annual repayment amount paid over an extended period of time, except that the borrower shall annually repay a minimum amount determined by the Secretary in accordance with section 428(b)(1)(L); “(C) a graduated repayment plan, with annual repayment amounts established at 2 or more graduated levels and paid over a fixed or extended period of time, except that the borrower’s scheduled payments shall not be less than 50 percent, nor more than 150 percent, of what the amortized payment on the amount owed would be if the loan were repaid under the standard repayment plan; and “(D) an income contingent repayment plan, with varying annual repayment amounts based on the income of the borrower, paid over an extended period of time prescribed by the Secretary, not to exceed 25 years, except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS loan. “(2) Selection by secretary.— If a borrower of a loan made under this part does not select a repayment plan described in paragraph (1), the Secretary may provide the borrower with a repayment plan described in subparagraph (A), (B), or (C) of paragraph (1). “(3) Changes in selections.— The borrower of a loan made under this part may change the borrower’s selection of a repayment plan under paragraph (1), or the Secretary’s selection of a plan for the borrower under paragraph (2), as the case may be, under such terms and conditions as may be established by the Secretary. “(4) Alternative repayment plans.— The Secretary may provide, on a case by case basis, an alternative repayment plan to a borrower of a loan made under this part who demonstrates to the satisfaction of the Secretary that the terms and conditions of the repayment plans available under paragraph (1) are not adequate to accommodate the borrower’s 107 STAT. 349exceptional circumstances. In designing such alternative repayment plans, the Secretary shall ensure that such plans do not exceed the cost to the Federal Government, as determined on the basis of the present value of future payments by such borrowers, of loans made using the plans available under paragraph (1). “(5) Repayment after default.— The Secretary may require any borrower who has defaulted on a loan made under this part to— “(A) pay all reasonable collection costs associated with such loan; and “(B) repay the loan pursuant to an income contingent repayment plan. “(e) Income Contingent Repayment.— “(1) Information and procedures.— The Secretary may obtain such information as is reasonably necessary regarding the income of a borrower (and the borrower’s spouse, if applicable) of a loan made under this part that is, or may be, repaid pursuant to income contingent repayment, for the purpose of determining the annual repayment obligation of the borrower. Returns and return information (as defined in section 6103 of the Internal Revenue Code of 1986) may be obtained under the preceding sentence only to the extent authorized by section 6103(1)(13) of such Code. The Secretary shall establish procedures for determining the borrower’s repayment obligation on that loan for such year, and such other procedures as are necessary to implement effectively income contingent repayment. “(2) Repayment based on adjusted gross income.— A repayment schedule for a loan made under this part and repaid pursuant to income contingent repayment shall be based on the adjusted gross income (as defined in section 62 of the Internal Revenue Code of 1986) of the borrower or, if the borrower is married and files a Federal income tax return jointly with the borrower’s spouse, on the adjusted gross income of the borrower and the borrower’s spouse. “(3) Additional documents.— A borrower who chooses, or is required, to repay a loan made under this part pursuant to income contingent repayment, and for whom adjusted gross income is unavailable or does not reasonably reflect the borrower’s current income, shall provide to the Secretary other documentation of income satisfactory to the Secretary, which documentation the Secretary may use to determine an appropriate repayment schedule. “(4) Repayment schedules.— Income contingent repayment schedules shall be established by regulations promulgated by the Secretary and shall require payments that vary in relation to the appropriate portion or the annual income of the borrower (and the borrower’s spouse, if applicable) as determined by the Secretary. “(5) Calculation of balance due.— The balance due on a loan made under this part that is repaid pursuant to income contingent repayment shall equal the unpaid principal amount of the loan, any accrued interest, and any fees, such as late charges, assessed on such loan. The Secretary may promulgate regulations limiting the amount of interest that may be capitalized on such loan, and the timing of any such capitalization. 107 STAT. 350 “(6) Notification to borrowers.— The Secretary shall establish procedures under which a borrower of a loan made under this part who chooses or is required to repay such loan pursuant to income contingent repayment is notified of the terms and conditions of such plan, including notification of such borrower— “(A) that the Internal Revenue Service will disclose to the Secretary tax return information as authorized under section 6103(1)(13) of the Internal Revenue Code of 1986; and “(B) that if a borrower considers that special circumstances, such as a loss of employment by the borrower or the borrower’s spouse, warrant an adjustment in the borrower’s loan repayment as determined using the information described in subparagraph (A), or the alternative documentation described in paragraph (3), the borrower may contact the Secretary, who shall determine whether such adjustment is appropriate, in accordance with criteria established by the Secretary. “(f) Deferment.— “(1) Effect on principal and interest.— A borrower of a loan made under this part who meets the requirements described in paragraph (2) shall be eligible for a deferment, during which periodic installments of principal need not be paid, and interest— “(A) shall not accrue, in the case of a— “(i) Federal Direct Stafford Loan; or “(ii) a Federal Direct Consolidation Loan that consolidated only Federal Direct Stafford Loans, or a combination of such loans and Federal Stafford Loans for which the student borrower received an interest subsidy under section 428; or “(B) shall accrue and be capitalized or paid by the borrower, in the case of a Federal Direct PLUS loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan not described in subparagraph (A)(ii). “(2) Eligibility.— A borrower of a loan made under this part shall be eligible for a deferment during any period— “(A) during which the borrower— “(i) is carrying at least one-half the normal full-time work load for the course of study that the borrower is pursuing, as determined by the eligible institution (as such term is defined in section 435(a)) the borrower is attending; 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 subparagraph, or a loan made under this part (other than a Federal Direct PLUS Loan or a Federal Direct Consolidation Loan), while serving in a medical internship or residency program; “(B) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment; 107 STAT. 351 “(C) not in excess of 3 years during which the Secretary determines, in accordance with regulations prescribed under section 435(o), that the borrower has experienced or will experience an economic hardship. “(g) Federal Direct Consolidation Loans.— A borrower of a loan made under this part may consolidate such loan with the loans described in section 428C(a)(4) only under such terms and conditions as the Secretary shall establish pursuant to section 457(a)(1) or regulations promulgated under this part. Loans made under this subsection shall be known as ‘Federal Direct Consolidation Loans’. “(h) Borrower Defenses.— Notwithstanding any other provision of State or Federal law, the Secretary shall specify in regulations (except as authorized under section 457(a)(1)) which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan made under this part, except that in no event may a borrower recover from the Secretary, in any action arising from or relating to a loan made under this part, an amount in excess of the amount such borrower has repaid on such loan. “(i) Loan Application and Promissory Note.— The common financial reporting form required in section 483(a)(1) shall constitute the application for loans made under this part (other than a Federal Direct PLUS loan). The Secretary shall develop, print, and distribute to participating institutions a standard promissory note and loan disclosure form. “(j) Loan Disbursement.— “(1) In general.— Proceeds of loans to students under this part shall be applied to the student’s account for tuition and fees, and, in the case of institutionally owned housing, to room and board. Loan proceeds that remain after the application of the previous sentence shall be delivered to the borrower by check or other means that is payable to and requires the endorsement or other certification by such borrower. “(2) Payment periods.— The Secretary shall establish periods for the payments described in paragraph (1) in a manner consistent with payment of basic grants under subpart 1 of part A of this title. “(k) Fiscal Control and Fund Accountability.— “(1) In general.— (A) An institution shall maintain financial records in a manner consistent with records maintained for other programs under this title. “(B) Except as otherwise required by regulations of the Secretary, or in a notice under section 457(a)(1), an institution may maintain loan funds under this part in the same account as other Federal student financial assistance. “(2) Payments and refunds.— Payments and refunds shall be reconciled in a manner consistent with the manner set forth for the submission of a payment summary report required of institutions participating in the program under subpart 1 of part A except that nothing in this paragraph shall prevent such reconciliations on a monthly basis. “(3) Transaction histories.— All transaction histories under this part shall be maintained using the same system designated by the Secretary for the provision of basic grants under subpart 1 of part A of this title. 107 STAT. 352 “SEC. 456. CONTRACTS. “(a) Contracts for Supplies and Services.— “(1) In general.— The Secretary shall, to the extent practicable, award contracts for origination, servicing, and collection described in subsection (b). In awarding such contracts, the Secretary shall ensure that such services and supplies are provided at competitive prices. “(2) Entities.— The entities with which the Secretary may enter into contracts shall include only entities which the Secretary determines are qualified to provide such services and supplies and will comply with the procedures applicable to the award of such contracts. In the case of awarding contracts for the origination, servicing, and collection of loans under this part, the Secretary shall enter into contracts only with entities that have extensive and relevant experience and demonstrated effectiveness. The entities with which the Secretary may enter into such contracts shall include, where practicable, agencies with agreements with the Secretary under sections 428(b) and (c), if such agencies meet the qualifications as determined by the Secretary under this subsection and if those agencies have such experience and demonstrated effectiveness. In awarding contracts to such State agencies, the Secretary shall, to the extent practicable and consistent with the purposes of this part, give special consideration to State agencies with a history of high quality performance to perform services for institutions of higher education within their State. “(3) Rule of construction.— Nothing in this section shall be construed as a limitation of the authority of any State agency to enter into an agreement for the purposes of this section as a member of a consortium of State agencies. “(b) Contracts for Origination, Servicing, and Data Systems.— The Secretary may enter into contracts for— “(1) the alternative origination of loans to students attending institutions of higher education with agreements to participate in the program under this part (or their parents), if such institutions do not have agreements with the Secretary under section 454(b); “(2) the servicing and collection of loans made under this part; “(3) the establishment and operation of 1 or more data systems for the maintenance of records on all loans made under this part; “(4) services to assist in the orderly transition from the loan programs under part B to the direct student loan program under this part; and “(5) such other aspects of the direct student loan program as the Secretary determines are necessary to ensure the successful operation of the program. “SEC. 457. REGULATORY ACTIVITIES. “(a) Notice in Lieu of Regulations for First Year of Program.— “(1) Notice in lieu of regulations for first year of program.— The Secretary shall publish in the Federal Register whatever standards, criteria, and procedures, consistent with the provisions of this part, the Secretary, in consultation with members of the higher education community, determines are 107 STAT. 353reasonable and necessary tn the successful implementation of the first year of the direct student loan program authorized by this part. Section 431 of the General Education Provisions Act shall not apply to the publication of such standards, criteria, and procedures. “(2) Negotiated rulemaking.— Beginning with academic year 1995–1996, all standards, criteria, procedures, and regulations implementing this part as amended by the Student Loan Reform Act of 1993 shall, to the extent practicable, be subject to negotiated rulemaking, including all such standards, criteria, procedures, and regulations promulgated from the date of enactment of such Act. “(b) Closing Date for Applications From Institutions.— The Secretary shall establish a date not later than October 1, 1993, as the closing date for receiving applications from institutions of higher education desiring to participate in the first year of the direct loan program under this part. “(c) Publication of List of Participating Institutions.— Not later than January 1, 1994, the Secretary shall publish in the Federal Register a list of the institutions of higher education selected to participate in the first year of the direct loan program under this part. “SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES. “(a) In General.— Each fiscal year, there shall be available to the Secretary of Education from funds available pursuant to section 422(g) and from funds not otherwise appropriated, funds to be obligated for administrative costs under this part, including the costs of the transition from the loan programs under part B to the direct student loan programs under this part (including the costs of annually assessing the program under this part and the progress of the transition) and transition support (including administrative costs) for the expenses of guaranty agencies in servicing outstanding loans in their portfolios and in guaranteeing new loans, not to exceed (from such funds not otherwise appropriated) $260,000,000 in fiscal year 1994, $345,000,000 in fiscal year 1995, $550,000,000 in fiscal year 1996, $595,000,000 in fiscal year 1997, and $750,000,000 in fiscal year 1998. If in any fiscal year the Secretary determines that additional funds for administrative expenses are needed as a result of such transition or the expansion of the direct student loan programs under this part, the Secretary is authorized to use funds available under this section for a subsequent fiscal year for such expenses, except that the total expenditures by the Secretary (from such funds not otherwise appropriated) shall not exceed $2,500,000,000 in fiscal years 1994 through 1998. The Secretary is also authorized to carry over funds available under this section to a subsequent fiscal year. “(b) Availability.— Funds made available under subsection (a) shall remain available until expended. “(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 107 STAT. 354for which administrative expenses under this section are made available. “(d) Notification.— In the event the Secretary finds it necessary to use the authority provided to the Secretary under subsection (a) to draw funds for administrative expenses from a future year’s funds, no funds may be expended under this section unless the Secretary immediately notifies the Committees on Appropriations of the Senate and of the House of Representatives, and the Labor and Human Resources Committee of the Senate and the Education and Labor Committee of the House of Representatives, of such action and explain the reasons for such action.”.