SCHOOL AS LENDER.

SEC. 8011. SCHOOL AS LENDER. Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is amended to read as follows:“(2) Requirements for eligible institutions.—“(A) In general.—To be an eligible lender under this part, an eligible institution—“(i) shall employ at least one person whose full-time responsibilities are limited to the administration of programs of financial aid for students attending such institution;“(ii) shall not be a home study school;“(iii) shall not—“(I) make a loan to any undergraduate student;“(II) make a loan other than a loan under section 428 or 428H to a graduate or professional student; or“(III) make a loan to a borrower who is not enrolled at that institution;“(iv) shall award any contract for financing, servicing, or administration of loans under this title on a competitive basis;“(v) shall offer loans that carry an origination fee or an interest rate, or both, that are less than such fee or rate authorized under the provisions of this title;“(vi) shall not have a cohort default rate (as defined in section 435(m)) greater than 10 percent;“(vii) shall, for any year for which the institution engages in activities as an eligible lender, provide for a compliance audit conducted in accordance with section 428(b)(1)(U)(iii)(I), and the regulations thereunder, and submit the results of such audit to the Secretary;“(viii) shall use any proceeds from special allowance payments and interest payments from borrowers, interest subsidies received from the Department of Education, and any proceeds from the sale or other disposition of loans, for need-based grant programs; and“(ix) shall have met the requirements of subparagraphs (A) through (F) of this paragraph as in effect on the day before the date of enactment of the Higher Education Reconciliation Act of 2005, and made loans under this part, on or before April 1, 2006.“(B) Administrative expenses.—An eligible lender under subparagraph (A) shall be permitted to use a portion of the proceeds described in subparagraph (A)(viii) for reasonable and direct administrative expenses.“(C) Supplement, not supplant.—An eligible lender under subparagraph (A) shall ensure that the proceeds described in subparagraph (A)(viii) are used to supplement, 120 STAT. 166 and not to supplant, non-Federal funds that would otherwise be used for need-based grant programs.”.