FEDERAL DIRECT LOAN PROGRAM.

SEC. 404. FEDERAL DIRECT LOAN PROGRAM.(a) Temporary Authority to Purchase Loans.—Section 459A (20 U.S.C. 1087i–1) is amended—(1) in subsection (a)—(A) in paragraph (2), in the matter preceding subparagraph (A), by striking “purchase of loans under this section” and inserting “purchase of loans under paragraph (1)”; and(B) by inserting after paragraph (2) the following new paragraph:“(3) Temporary authority to purchase rehabilitated loans.—“(A) Authority.—In addition to the authority described in paragraph (1), the Secretary, in consultation with the Secretary of the Treasury, is authorized to purchase, or enter into forward commitments to purchase, from any eligible lender (as defined in section 435(d)(1)), loans that such lender purchased under section 428F on or after October 1, 2003, and before July 1, 2010, and that are not in default, on such terms as the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget jointly determine are in the best interest of the United States, except that any 123 STAT. 1946 purchase under this paragraph shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased), as determined jointly by the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget.“(B) Federal register notice.—The Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget shall jointly publish a notice in the Federal Register prior to any purchase of loans under this paragraph that—“(i) establishes the terms and conditions governing the purchases authorized by this paragraph;“(ii) includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget will jointly consider in evaluating the price at which to purchase loans rehabilitated pursuant to section 428F(a); and“(iii) describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).”; and(2) by amending subsection (b) to read as follows:“(b) Proceeds.—The Secretary shall require, as a condition of any purchase under subsection (a), that the funds paid by the Secretary to any eligible lender under this section be used—“(1) to ensure continued participation of such lender in the Federal student loan programs authorized under part B of this title; and“(2)(A) in the case of loans purchased pursuant to subsection (a)(1), to originate new Federal loans to students, as authorized under part B of this title; or“(B) in the case of loans purchased pursuant to subsection (a)(3), to originate such new Federal loans to students, or to purchase loans in accordance with section 428F(a).”.(b) Other Amendments.—Part D of title IV (20 U.S.C. 1087a et seq.) is amended—(1) by repealing paragraph (3) of section 453(c) (20 U.S.C. 1087c(c));(2) in section 455 (20 U.S.C. 1087e)—(A) in subsection (d)(1)(C), by striking “428(b)(9)(A)(v)” and inserting “428(b)(9)(A)(iv)”;(B) in subsection (h), by striking “(except as authorized under section 457(a)(1))”; and(C) in subsection (k)(1)(B), by striking “, or in a notice under section 457(a)(1),”;(3) by repealing section 457 (20 U.S.C. 1087g); and(4) in section 460 (20 U.S.C. 1087j)—(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 428J.”; and(B) in subsection (g)(2)—(i) by striking subparagraph (A);123 STAT. 1947(ii) by redesignating subparagraphs (B) through (D) as subparagraphs (A) through (C), respectively; and(iii) in subparagraph (C), as redesignated by clause (ii), by striking “12571” and inserting “12601”.