[107th Congress Public Law 139]
[From the U.S. Government Printing Office]
<DOC>
[DOCID: f:publ139.107]
[[Page 7]]
STUDENT LOAN INTEREST RATES
[[Page 116 STAT. 8]]
Public Law 107-139
107th Congress
An Act
To amend the Higher Education Act of 1965 to establish fixed interest
rates for student and parent borrowers, to extend current law with
respect to special allowances for lenders, and for other
purposes. <<NOTE: Feb. 8, 2002 - [S. 1762]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. INTEREST RATE PROVISIONS.
(a) FFEL Fixed Interest Rates.--
(1) Amendment.--Section 427A of the Higher Education Act of
1965 (20 U.S.C. 1077a) is amended--
(A) by redesignating subsections (l) and (m) as
subsections (m) and (n), respectively; and
(B) by inserting after subsection (k) the following
new subsection:
``(l) Interest Rates for New Loans on or After July 1, 2006.--
``(1) In general.--Notwithstanding subsection (h), with
respect to any loan made, insured, or guaranteed under this part
(other than a loan made pursuant to section 428B or 428C) for
which the first disbursement is made on or after July 1, 2006,
the applicable rate of interest shall be 6.8 percent on the
unpaid principal balance of the loan.
``(2) PLUS loans.--Notwithstanding subsection (h), with
respect to any loan under section 428B for which the first
disbursement is made on or after July 1, 2006, the applicable
rate of interest shall be 7.9 percent on the unpaid principal
balance of the loan.
``(3) Consolidation loans.--With respect to any
consolidation loan under section 428C for which the application
is received by an eligible lender on or after July 1, 2006, the
applicable rate of interest shall be at an annual rate on the
unpaid principal balance of the loan that is equal to the lesser
of--
``(A) the weighted average of the interest rates on
the loans consolidated, rounded to the nearest higher
one-eighth of 1 percent; or
``(B) 8.25 percent.''.
(2) Conforming amendment.--Section 428C(c)(1)(A) of such Act
(20 U.S.C. 1078-3(c)(1)(A)) is amended to read as follows:
[[Page 116 STAT. 9]]
``(1) Interest rate.--(A) Notwithstanding subparagraphs (B)
and (C), with respect to any loan made under this section for
which the application is received by an eligible lender--
``(i) on or after October 1, 1998, and before July
1, 2006, the applicable interest rate shall be
determined under section 427A(k)(4); or
``(ii) on or after July 1, 2006, the applicable
interest rate shall be determined under section
427A(l)(3).''.
(b) Direct Loans Fixed Interest Rates.--
(1) Technical correction.--Paragraph (6) of section 455(b)
of the Higher Education Act of 1965 (20 U.S.C. 1087e(b)), as
redesignated by section 8301(c)(1) of the Transportation Equity
Act for the 21st Century (Public Law 105-178; 112 Stat. 498) is
redesignated as paragraph (9) and is transferred to follow
paragraph (7) of section 455(b) of the Higher Education Act of
1965.
(2) Amendments.--Section 455(b) of the Higher Education Act
of 1965 (20 U.S.C. 1087e(b)) is amended--
(A) by redesignating paragraph (7) as paragraph (8);
and
(B) by inserting after paragraph (6) the following
new paragraph:
``(7) Interest rate provision for new loans on or after july
1, 2006.--
``(A) Rates for fdsl and fdusl.--Notwithstanding the
preceding paragraphs of this subsection, for Federal
Direct Stafford Loans and Federal Direct Unsubsidized
Stafford Loans for which the first disbursement is made
on or after July 1, 2006, the applicable rate of
interest shall be 6.8 percent on the unpaid principal
balance of the loan.
``(B) PLUS loans.--Notwithstanding the preceding
paragraphs of this subsection, with respect to any
Federal Direct PLUS loan for which the first
disbursement is made on or after July 1, 2006, the
applicable rate of interest shall be 7.9 percent on the
unpaid principal balance of the loan.
``(C) Consolidation loans.--Notwithstanding the
preceding paragraphs of this subsection, any Federal
Direct Consolidation loan for which the application is
received on or after July 1, 2006, shall bear interest
at an annual rate on the unpaid principal balance of the
loan that is equal to the lesser of--
``(i) the weighted average of the interest
rates on the loans consolidated, rounded to the
nearest higher one-eighth of one percent; or
``(ii) 8.25 percent.''.
(c) Extension of Current Interest Rate Provisions for Three Years.--
Sections 427A(k) and 455(b)(6) of the Higher Education Act of 1965 (20
U.S.C. 1077a(k), 1087e(b)(6)) are each amended--
(1) by striking ``2003'' in the heading and inserting
``2006''; and
(2) by striking ``July 1, 2003,'' each place it appears and
inserting ``July 1, 2006,''.
[[Page 116 STAT. 10]]
SEC. 2. EXTENSION OF SPECIAL ALLOWANCE PROVISION.
Section 438(b)(2)(I) of the Higher Education Act of 1965 (20 U.S.C.
1087-1(b)(2)(I)) is amended--
(1) by striking ``, and before july 1, 2003'' in the
heading;
(2) by striking ``and before July 1, 2003,'' each place it
appears, other than in clauses (ii) and (v);
(3) by striking clause (ii) and inserting the following:
``(ii) In school and grace period.--In the
case of any loan--
``(I) for which the first
disbursement is made on or after January
1, 2000, and before July 1, 2006, and
for which the applicable rate of
interest is described in section
427A(k)(2); or
``(II) for which the first
disbursement is made on or after July 1,
2006, and for which the applicable rate
of interest is described in section
427A(l)(1), but only with respect to
(aa) periods prior to the beginning of
the repayment period of the loan; or
(bb) during the periods in which
principal need not be paid (whether or
not such principal is in fact paid) by
reason of a provision described in
section 427(a)(2)(C) or 428(b)(1)(M);
clause (i)(III) of this subparagraph shall be
applied by substituting `1.74 percent' for `2.34
percent'.'';
(4) in clause (iii), by inserting ``or (l)(2)'' after
``427A(k)(3)'';
(5) in clause (iv), by inserting ``or (l)(3)'' after
``427A(k)(4)'';
(6) in clause (v)--
(A) in the heading, by inserting ``before july 1,
2006'' after ``plus loans''; and
(B) by striking ``July 1, 2003,'' and inserting
``July 1, 2006,'';
(7) in clause (vi)--
(A) by inserting ``or (l)(3)'' after ``427A(k)(4)''
the first place it appears; and
(B) by inserting ``or (l)(3), whichever is
applicable'' after ``427A(k)(4)'' the second place it
appears; and
(8) by adding at the end the following new clause:
``(vii) Limitation on special allowances for
plus loans on or after july 1, 2006.--In the case
of PLUS loans made under section 428B and first
disbursed on or after July 1, 2006, for which the
interest rate is determined under section
427A(l)(2), a special allowance shall not be paid
for such loan during any 12-month period beginning
on July 1 and ending on June 30 unless--
[[Page 116 STAT. 11]]
``(I) the average of the bond
equivalent rates of the quotes of the 3-
month commercial paper (financial), as
published by the Board of Governors of
the Federal Reserve System in
Publication H-15 (or its successor), for
the last calendar week ending on or
before such July 1; plus
``(II) 2.64 percent,
exceeds 9.0 percent.''.
Approved February 8, 2002.
LEGISLATIVE HISTORY--S. 1762:
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CONGRESSIONAL RECORD:
Vol. 147 (2001):
Dec. 14, considered and passed
Senate.
Dec. 19, 20, considered and rejected
in House.
Vol. 148 (2002):
Jan. 24, considered and passed
House.
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