FEDERAL FAMILY EDUCATION LOAN PROGRAM.

SEC. 402. FEDERAL FAMILY EDUCATION LOAN PROGRAM.(a) Amendment to Provision Amended by the College Cost Reduction and Access Act.—(1) In general.—Section 428(b)(1)(G)(i) (20 U.S.C. 1078(b)(1)(G)(i)), as amended by section 303 of the College Cost Reduction and Access Act (Public Law 110–84), is amended by striking “or 439(q)”.(2) Effective date.—The amendment made by paragraph (1) shall be effective as if enacted as part of the amendment in section 303(a) of the College Cost Reduction and Access Act (Public Law 110–84), shall take effect on October 1, 2012, and shall apply with respect to loans made on or after such date.(b) Entrance Counseling Functions.—(1) Guaranty agencies.—Section 428(b)(3) (20 U.S.C. 1078(b)(3)) is amended—(A) in subparagraph (C), by inserting “or 485(l)” after “section 485(b)”; and(B) in subparagraph (D), by inserting “or 485(l)” after “section 485(b)”.(2) Eligible lenders.—Section 435(d)(5) (20 U.S.C. 1085(d)(5)) is amended—(A) in subparagraph (E), by inserting “or 485(l)” after “section 485(b)”; and(B) in subparagraph (F), by inserting “or 485(l)” after “section 485(b)”.(c) Amendment to Provision Amended by the Higher Education Opportunity Act.—(1) In general.—Section 428C(c)(3)(A) (20 U.S.C. 1078–3(c)(3)(A)), as amended by section 425 of the Higher Education 123 STAT. 1941 Opportunity Act (Public Law 110–315), is amended by striking “section 493C” and inserting “section 493C,”.(2) Effective date.—The amendment made by paragraph (1) shall be effective as if enacted as part of the amendments in section 425(d)(1) of the Higher Education Opportunity Act (Public Law 110–315), and shall take effect on July 1, 2009.(d) Rehabilitation of Student Loans.—(1) Section 428F (20 U.S.C. 1078–6) is amended—(A) in subsection (a)—(i) by amending paragraph (1) to read as follows:“(1) Sale or assignment of loan.—“(A) In general.—Each guaranty agency, upon securing 9 payments made within 20 days of the due date during 10 consecutive months of amounts owed on a loan for which the Secretary has made a payment under paragraph (1) of section 428(c), shall—“(i) if practicable, sell the loan to an eligible lender; or“(ii) on or before September 30, 2011, assign the loan to the Secretary if—“(I) the Secretary has determined that market conditions unduly limit a guaranty agency’s ability to sell loans under clause (i); and“(II) the guaranty agency has been unable to sell loans under clause (i).“(B) Monthly payments.—Neither the guaranty agency nor the Secretary shall demand from a borrower as monthly payment amounts described in subparagraph (A) more than is reasonable and affordable based on the borrower’s total financial circumstances.“(C) Consumer reporting agencies.—Upon the sale or assignment of the loan, the Secretary, guaranty agency or other holder of the loan shall request any consumer reporting agency to which the Secretary, guaranty agency or holder, as applicable, reported the default of the loan, to remove the record of the default from the borrower’s credit history.“(D) Duties upon sale.—With respect to a loan sold under subparagraph (A)(i)—“(i) the guaranty agency—“(I) shall repay the Secretary 81.5 percent of the amount of the principal balance outstanding at the time of such sale, multiplied by the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and“(II) may, in order to defray collection costs—“(aa) charge to the borrower an amount not to exceed 18.5 percent of the outstanding principal and interest at the time of the loan sale; and“(bb) retain such amount from the proceeds of the loan sale; and“(ii) the Secretary shall reinstate the Secretary’s obligation to—“(I) reimburse the guaranty agency for the amount that the agency may, in the future, expend 123 STAT. 1942 to discharge the guaranty agency’s insurance obligation; and“(II) pay to the holder of such loan a special allowance pursuant to section 438.“(E) Duties upon assignment.—With respect to a loan assigned under subparagraph (A)(ii)—“(i) the guaranty agency shall add to the principal and interest outstanding at the time of the assignment of such loan an amount equal to the amount described in subparagraph (D)(i)(II)(aa); and“(ii) the Secretary shall pay the guaranty agency, for deposit in the agency’s Operating Fund established pursuant to section 422B, an amount equal to the amount added to the principal and interest outstanding at the time of the assignment in accordance with clause (i).“(F) Eligible lender limitation.—A loan shall not be sold to an eligible lender under subparagraph (A)(i) if such lender has been found by the guaranty agency or the Secretary to have substantially failed to exercise the due diligence required of lenders under this part.“(G) Default due to error.—A loan that does not meet the requirements of subparagraph (A) may also be eligible for sale or assignment under this paragraph upon a determination that the loan was in default due to clerical or data processing error and would not, in the absence of such error, be in a delinquent status.”;(ii) in paragraph (2)—(I) by striking “paragraph (1) of this subsection” and inserting “paragraph (1)(A)(i)”; and(II) by striking “paragraph (1)(B)(ii) of this subsection” and inserting “paragraph (1)(D)(ii)(I)”;(iii) in paragraph (3)—(I) by striking “sold under paragraph (2)” and inserting “sold or assigned under paragraph (1)(A)”; and(II) by striking “sale.” and inserting “sale or assignment.”;(iv) in paragraph (4), by striking “which is sold under paragraph (1) of this subsection” and inserting “that is sold or assigned under paragraph (1)”; and(v) in paragraph (5), by inserting “(whether by loan sale or assignment)” after “rehabilitating a loan”; and(B) in subsection (b), in the first sentence, by inserting “or assigned to the Secretary” after “sold to an eligible lender”.(2) Effective date.—The amendments made by paragraph (1) shall be effective on the date of enactment of this Act, and shall apply to any loan on which monthly payments described in section 428F(a)(1)(A) were paid before, on, or after such date of enactment.(e) Repayment in Full for Death and Disability.—(1) In general.—Section 437(a)(1) (20 U.S.C. 1087(a)(1)), as amended by section 437 of the Higher Education Opportunity Act (Public Law 110–315), is amended—123 STAT. 1943(A) in the matter preceding subparagraph (A), by striking “Secretary),, or if” and inserting “Secretary), or if”; and(B) in subparagraph (B), by inserting “the reinstatement and resumption to be” after “determines”.(2) Effective date.—The amendments made by paragraph (1) shall be effective as if enacted as part of the amendments in section 437(a) of the Higher Education Opportunity Act (Public Law 110–315), and shall take effect on July 1, 2010.(f) Other Amendments.—Part B of title IV (20 U.S.C. 1071 et seq.) is further amended—(1) in section 428 (20 U.S.C. 1078)—(A) in subsection (a)(2)(A)(i)(II), by striking “and” after the semicolon at the end;(B) in subsection (b)—(i) in the matter following subclause (II) of paragraph (1)(M)(i), by inserting “section” before “428B”;(ii) in paragraph (3)(A)(i), by striking “any institution of higher education or the employees of an institution of higher education” and inserting “any institution of higher education, any employee of an institution of higher education, or any individual or entity”;(iii) in paragraph (4), by striking “For the purpose of paragraph (1)(M)(i)(III) of this subsection,” and inserting “With respect to the graduate fellowship program referred to in paragraph (1)(M)(i)(II),”; and(iv) in paragraph (7)—(I) in subparagraph (B), by striking “clause (i) or (ii) of”; and(II) in subparagraph (D), by striking “subparagraph (A)(i)” and inserting “subparagraph (A)”; and(C) in subsection (c)(9)(K), by striking “3 months” and inserting “6 months”;(2) in section 428B(e) (20 U.S.C. 1078–2(e))—(A) in paragraph (3)(B), by striking “subsection (c)(5)(B)” and inserting “subsection (d)(5)(B)”; and(B) by repealing paragraph (5);(3) in section 428C (20 U.S.C. 1078–3)—(A) in subsection (a)(4)(E), by striking “subpart II of part B” and inserting “part E”;(B) in the matter preceding clause (i) of subsection (c)(2)(A)—(i) by striking “subsection (b)(2)(F)” and inserting “subsection (b)(2)”; and(ii) by inserting a comma after “graduated”;(C) in subsection (d)(3)(D), by striking “loan insurance fund” and inserting “loan insurance account”; and(D) in subsection (f)(3), by striking “subsection (a)” and inserting “this subsection”;(4) in section 428G(c) (20 U.S.C. 1078–7(c))—(A) in paragraph (1), by striking “section 428(a)(2)(A)(i)(III)” and inserting “section 428(a)(2)(A)(i)(II)”; and(B) by striking paragraph (3) and inserting the following:“(3) notwithstanding subsection (a)(2), may, with the permission of the borrower, be disbursed by the lender on 123 STAT. 1944 a weekly or monthly basis, provided that the proceeds of the loan are disbursed by the lender in substantially equal weekly or monthly installments, as the case may be, over the period of enrollment for which the loan is made.”;(5) in section 428H (20 U.S.C. 1078–8)—(A) in subsection (d), by amending the text of the header of paragraph (2) to read as follows: “Limits for graduate, professional, and independent postbaccalaureate students”; and(B) in subsection (e), by amending paragraph (6) to read as follows:“(6) Repayment period.—For purposes of calculating the repayment period under section 428(b)(9), such period shall commence at the time the first payment of principal is due from the borrower.”;(6) in section 428J (20 U.S.C. 1078–10)—(A) in subsection (c)(1), by adding at the end the following: “No borrower may receive a reduction of loan obligations under both this section and section 460.”; and(B) in subsection (g)(2)—(i) in subparagraph (B), by inserting “or” after the semicolon at the end;(ii) by striking subparagraph (C);(iii) by redesignating subparagraph (D) as subparagraph (C); and(iv) in subparagraph (C), as redesignated by clause (iii), by striking “12571” and inserting “12601”;(7) in section 428K(g)(9)(B) (20 U.S.C. 1078–11(g)(9)(B)), by striking “under subsection (ll)(3) of such section (42 U.S.C. 1395x(ll)(3))” and inserting “under subsection (ll)(4) of such section (42 U.S.C. 1395x(ll)(4))”;(8) in section 430A(f) (20 U.S.C. 1080a(f))—(A) by striking “and (6)” and inserting “and (5)”; and(B) by striking “(a)(6)” and inserting “(a)(5)”;(9) in section 432 (20 U.S.C. 1082)—(A) in subsection (b), by striking “section 1078 of this title” and inserting “section 428”; and(B) in subsection (m)(1)(B)—(i) in clause (i), by inserting “and” after the semicolon at the end; and(ii) in clause (ii), by striking “; and” and inserting a period;(10) in section 435 (20 U.S.C. 1085)—(A) in subsection (a)(2)(C)(ii), by striking “a tribally controlled community college within the meaning of section 2(a)(4) of the Tribally Controlled Community College Assistance Act of 1978” and inserting “a tribally controlled college or university, as defined in section 2(a)(4) of the Tribally Controlled Colleges and Universities Assistance Act of 1978”;(B) in subsection (d)—(i) in paragraph (1)—(I) in subparagraph (A)(ii)(III), by striking “section 501(1) of such Code” and inserting “section 501(a) of such Code”; and123 STAT. 1945(II) in subparagraph (G), by striking “sections 428A(d), 428B(d), and 428C,” and inserting “sections 428B(d) and 428C,”;(ii) in paragraph (2)(A)(vi), by striking “section 435(m)” and inserting “subsection (m)”;(iii) in paragraph (3), by striking “section 435(m)” and inserting “subsection (m)”; and(iv) in paragraph (5)(A), by striking “to any institution of higher education or any employee of an institution of higher education in order to secure applicants for loans under this part” and inserting “to any institution of higher education, any employee of an institution of higher education, or any individual or entity in order to secure applicants for loans under this part”;(C) in subsection (o)(1)(A)(ii), by striking “Service” and inserting “Services”; and(D) in subsection (p)(1), by striking “section 771” and inserting “section 781”; and(11) in section 438(b)(2) (20 U.S.C. 1087–1(b)(2))—(A) in the second sentence of subparagraph (A), by striking “427A(f)” and inserting “427A(i)”;(B) in the first sentence of subparagraph (B)(i), by striking “1954” and inserting “1986”; and(C) in the second sentence of subparagraph (F), by striking “427A(f)” and inserting “427A(i)”.