REDUCTION IN THE SPECIAL ALLOWANCE PAYMENT.

SEC. 4111. REDUCTION IN THE SPECIAL ALLOWANCE PAYMENT. Paragraph (2) of section 438(b) of the Act (20 U.S.C. 1087–1(b)(2)) is amended— (1) in subparagraph (A)— (A) by striking “and (D)” and inserting “(D), (E), and (F)”; and (B) by striking “427A(e)” and inserting “427A(f)”; and (2) by adding at the end the following new subparagraphs: “(E) In the case of any loan for which the applicable rate of interest is described in section 427A(g)(2), subparagraph (A)(iii) shall be applied by substituting ‘2.5 percent’ for ‘3.10 percent’. “(F) Subject to paragraph (4), the special allowance paid pursuant to this subsection on loans for which the applicable rate of interest is determined under section 427A(h) shall be computed (i) by determining the applicable bond equivalent rate of the security with a comparable maturity, as established by the Secretary, (ii) by subtracting the applicable interest rates on such loans from such applicable bond equivalent rate, (iii) by adding 1.0 percent to the resultant percent, and (iv) by dividing the resultant percent by 4. If such computation produces a number less than zero, such loans shall be subject to section 427A(f).”.