SPECIAL ALLOWANCES.

SEC. 305. SPECIAL ALLOWANCES.(a) Reduction of Lender Special Allowance Payments.—Section 438(b)(2)(I) (20 U.S.C. 1087–1(b)(2)(I)) is amended—(1) in clause (i), by striking “clauses (ii), (iii), and (iv)” and inserting “the following clauses”;(2) in clause (v)(III), by striking “clauses (ii), (iii), and (iv)” and inserting “clauses (ii), (iii), (iv), and (vi)”; and(3) by adding at the end the following:“(vi) Reduction for loans disbursed on or after october 1, 2007.—With respect to a loan on which the applicable interest rate is determined under section 427A(l) and for which the first disbursement of principal is made on or after October 1, 2007, the special allowance payment computed pursuant to this subparagraph shall be computed—“(I) for loans held by an eligible lender not described in subclause (II)—“(aa) by substituting ‘1.79 percent’ for ‘2.34 percent’ each place the term appears in this subparagraph;“(bb) by substituting ‘1.19 percent’ for ‘1.74 percent’ in clause (ii);“(cc) by substituting ‘1.79 percent’ for ‘2.64 percent’ in clause (iii); and“(dd) by substituting ‘2.09 percent’ for ‘2.64 percent’ in clause (iv); and“(II) for loans held by an eligible not-for-profit holder—“(aa) by substituting ‘1.94 percent’ for ‘2.34 percent’ each place the term appears in this subparagraph;“(bb) by substituting ‘1.34 percent’ for ‘1.74 percent’ in clause (ii);“(cc) by substituting ‘1.94 percent’ for ‘2.64 percent’ in clause (iii); and“(dd) by substituting ‘2.24 percent’ for ‘2.64 percent’ in clause (iv).”.(b) Increased Loan Fees From Lenders.—Paragraph (2) of section 438(d) (20 U.S.C. 1087–1(d)(2)) is amended to read as follows:121 STAT. 800 “(2) Amount of loan fees.—The amount of the loan fee which shall be deducted under paragraph (1), but which may not be collected from the borrower, shall be equal to—“(A) except as provided in subparagraph (B), 0.50 percent of the principal amount of the loan with respect to any loan under this part for which the first disbursement was made on or after October 1, 1993; and“(B) 1.0 percent of the principal amount of the loan with respect to any loan under this part for which the first disbursement was made on or after October 1, 2007.”.