H.R. 1425

Student Aid Reward Act of 2005

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I

109th CONGRESS

1st Session

H. R. 1425

IN THE HOUSE OF REPRESENTATIVES

March 17, 2005

Mr. Petri (for himself, Mr. George Miller of California, Mr. Doggett, Mr. Brown of Ohio, Mr. Sanders, Mr. Bishop of New York, Mr. Filner, Mr. McDermott, Ms. Kilpatrick of Michigan, Ms. Lee, Mr. Grijalva, Mr. Hinchey, Mr. Kucinich, Mr. Wu, Mr. Van Hollen, Ms. Watson, Mr. Etheridge, Ms. Moore of Wisconsin, Mr. Cummings, Ms. McCollum of Minnesota, Mr. Israel, Mrs. Jones of Ohio, Ms. Bordallo, Mr. Crowley, Ms. Schakowsky, Mr. Hastings of Florida, Mr. Tierney, Mr. Kildee, Mr. Brown of South Carolina, Ms. Pelosi, and Mr. Alexander) introduced the following bill; which was referred to the Committee on Education and the Workforce

A BILL

To ensure that the Federal student loans are delivered as efficiently as possible, so that there is more grant aid for students.

1.

Short title

This Act may be cited as the Student Aid Reward Act of 2005.

2.

Student Aid Reward Program

Part G of title IV of the Higher Education Act of 1965 is amended by inserting after section 489 (20 U.S.C. 1096) the end the following:

489A.

Student Aid Reward Program

(a)

Program authorized

The Secretary shall carry out a Student Aid Reward Program to encourage institutions of higher education to participate in the student loan program under this title that is most cost-effective for taxpayers.

(b)

Program requirements

In carrying out the Student Aid Reward Program, the Secretary shall—

(1)

provide to each institution of higher education participating in the student loan program under this title that is most cost-effective for taxpayers a Student Aid Reward Payment, in an amount determined in accordance with subsection (c), to encourage the institution to participate in that student loan program;

(2)

require each institution of higher education receiving a payment under this section to provide student loans under that student loan program for a period of 5 years from the date the payment is made;

(3)

where appropriate, require that funds paid to institutions of higher education under this section be used to award students a supplement to such students’ Pell Grants under subpart 1 of part A;

(4)

permit such funds to also be used to award lower and middle income graduate students need-based grants; and

(5)

encourage all institutions of higher education to participate in the Student Aid Reward Program.

(c)

Amount

The amount of a Student Aid Reward Payment under this section shall be not less than 50 percent of the savings to the Federal Government generated by the institution’s participation in the student loan program under this title that is most cost-effective for taxpayers instead of the institution’s participation in the student loan program not cost-effective for taxpayers.

(d)

Trigger to ensure cost neutrality

(1)

Limit to ensure cost neutrality

Notwithstanding subsection (c), the Secretary shall not distribute Student Aid Reward Payments under the Student Aid Reward Program that, in the aggregate, exceed the Federal savings resulting from implementation of the Student Aid Reward Program.

(2)

Federal savings

In calculating Federal savings, as used in paragraph (1), the Secretary shall determine Federal savings on loans made to students at institutions of higher education that participate the student loan program under this title that is most cost-effective for taxpayers and that, on the date of enactment of the Student Aid Reward Program, participated in the student loan program that is not the most cost-effective for taxpayers, resulting from the difference of—

(A)

the Federal cost of loan volume made under the student loan program under this title that is most cost-effective for taxpayers; and

(B)

the Federal cost of an equivalent type and amount of loan volume made, insured, or guaranteed under the student loan program under this title that is not the most cost-effective for taxpayers.

(3)

Distribution rules

If the Federal savings determined under paragraph (2) is not sufficient to distribute full Student Aid Reward Payments under the Student Aid Reward Program, the Secretary shall—

(A)

first make Student Aid Reward Payments to those institutions of higher education that participated in the student loan program under this title that is not the most cost-effective for taxpayers on the date of enactment of the Student Aid Reward Program; and

(B)

with any remaining Federal savings after making Payments under subparagraph (A), make Student Aid Reward Payments to the institutions of higher education not described in subparagraph (A) on a pro-rata basis.

(4)

Distribution to students

Any institution of higher education that receives a Student Aid Reward Payment under this section—

(A)

shall distribute, where appropriate, part or all of such payment among the students of such institution who are Pell Grant recipients by awarding such students a supplemental grant; and

(B)

may distribute part of such payment as a supplemental grant to graduate students in financial need.

(5)

Estimates, adjustments, and carry over

(A)

Estimates and adjustments

The Secretary may make Student Aid Reward Payments to institutions of higher education on the basis of estimates, using the best data available at the beginning of an academic/fiscal year. If the Secretary determines thereafter that loan program costs for that academic/fiscal year were different than such estimate, the Secretary shall adjust (reduce or increase) subsequent Student Aid Reward Payments rewards paid to such institutions of higher education to reflect such difference.

(B)

Carry over

Any institution of higher education that receives a reduced Student Aid Reward Payment under paragraph (3)(B), shall remain eligible for the unpaid portion of such institution’s financial reward payment, as well as any additional financial reward payments for which the institution is otherwise eligible, in subsequent academic or fiscal years.

(e)

Definition

For purposes of this section—

(1)

the student loan program under this title that is most cost-effective for taxpayers is the loan program under part B or D of this title that has the lowest overall cost to the Federal Government (including administrative costs) for the loans authorized by such parts; and

(2)

the student loan program under this title that is not most cost-effective for taxpayers is the loan program under part B or D of this title that does not have the lowest overall cost to the Federal Government (including administrative costs) for the loans authorized by such parts.

.