FEDERAL CAPITAL CONTRIBUTIONS INTO STUDENT LOAN FUNDS.

SEC. 603. FEDERAL CAPITAL CONTRIBUTIONS INTO STUDENT LOAN FUNDS. (a) Standards With Respect to Loan Collection.—Section 740(c)(1) (42 U.S.C. 294m(c)(1) is amended by adding at the end the following new sentence: “This subsection may not be construed to require such schools to reimburse the student loan fund under this subpart for Loans that became uncollectible prior to August 1985 or to penalize such schools with respect to such loans.”. (b) Reduction in Interest Rate.—Section 741(e) (42 U.S.C. 294n(e)) is amended by striking “9” and inserting “5”. (c) Grace Period for All Full-Time Students.—Section 741(c)(1) (42 U.S.C. 294n(c)(1) is amended by striking “and” at the end of subparagraph (b) and by adding at the end the following new subparagraph: “(D) during which the borrower is pursuing a full-time course of study at such a school; and”. (d) Striking of Date Certain With Respect to Distribution of Assets of Loan Funds.—Section 743 (42 U.S.C. 294p) is amended— (1) in subsection (a), by amending the matter preceding paragraph (1) to read as follows: “If a school terminates a loan fund established under an agreement pursuant to section 740(b), or if the Secretary for good cause terminates the agreement with the school, there shall be a capital distribution as follows:”; and (2) by amending subsection (b) to read as follows: “(b) If a capital distribution is made under subsection (a), the school involved shall, after the capital distribution, pay to the Secretary, not less often than quarterly, the same proportionate share of amounts received by the school in payment of principal or interest on loans made from the loan fund established pursuant to section 740(b) as was determined by the Secretary under subsection (a).”.