 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1077a. Applicable interest rates


(a) Rates to be consistent for borrower's entire debt

    With respect to any loan to cover the cost of instruction for any 
period of instruction beginning on or after January 1, 1981, the rate of 
interest applicable to any borrower shall--
        (1) not exceed 7 percent per year on the unpaid principal 
    balance of the loan in the case of any borrower who, on the date of 
    entering into the note or other written evidence of that loan, has 
    an outstanding balance of principal or interest on any loan made, 
    insured, or guaranteed under this part, for which the interest rate 
    does not exceed 7 percent;
        (2) except as provided in paragraph (3), be 9 percent per year 
    on the unpaid principal balance of the loan in the case of any 
    borrower who, on the date of entering into the note or other written 
    evidence of that loan, has no outstanding balance of principal or 
    interest on any loan described in paragraph (1) or any loan for 
    which the interest rate is determined under paragraph (1); or
        (3) be 8 percent per year on the unpaid principal balance of the 
    loan for a loan to cover the cost of education for any period of 
    enrollment beginning on or after a date which is 3 months after a 
    determination made under subsection (b) of this section in the case 
    of any borrower who, on the date of entering into the note or other 
    written evidence of the loan, has no outstanding balance of 
    principal or interest on any loan for which the interest rate is 
    determined under paragraph (1) or (2) of this subsection.

(b) Reduction for new borrowers after decline in Treasury bill rates

    If for any 12-month period beginning on or after January 1, 1981, 
the Secretary, after consultation with the Secretary of the Treasury, 
determines that the average of the bond equivalent rates of 91-day 
Treasury bills auctioned for such 12-month period is equal to or less 
than 9 percent, the interest rate for loans under this part shall be the 
rate prescribed in subsection (a)(3) of this section for borrowers 
described in such subsection.

(c) Rates for supplemental loans for students and loans for parents

                           (1) In general

        Except as otherwise provided in this subsection, the applicable 
    rate of interest on loans made pursuant to section 1078-1 \1\ or 
    1078-2 of this title on or after October 1, 1981, shall be 14 
    percent per year on the unpaid principal balance of the loan.
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     (2) Reduction of rate after decline in Treasury bill rates

        If for any 12-month period beginning on or after October 1, 
    1981, the Secretary, after consultation with the Secretary of the 
    Treasury, determines that the average of the bond equivalent rates 
    of 91-day Treasury bills auctioned for such 12-month period is equal 
    to or less than 14 percent, the applicable rate of interest for 
    loans made pursuant to section 1078-1 \1\ or 1078-2 of this title on 
    and after the first day of the first month beginning after the date 
    of publication of such determination shall be 12 percent per year on 
    the unpaid principal balance of the loan.

     (3) Increase of rate after increase in Treasury bill rates

        If for any 12-month period beginning on or after the date of 
    publication of a determination under paragraph (2), the Secretary, 
    after consultation with the Secretary of the Treasury, determines 
    that the average of the bond equivalent rates of 91-day Treasury 
    bills auctioned for such 12-month period exceeds 14 percent, the 
    applicable rate of interest for loans made pursuant to section 1078-
    1 \1\ or 1078-2 of this title on and after the first day of the 
    first month beginning after the date of publication of that 
    determination under this paragraph shall be 14 percent per year on 
    the unpaid principal balance of the loan.

                 (4) Availability of variable rates

        (A) For any loan made pursuant to section 1078-1 \1\ or 1078-2 
    of this title and disbursed on or after July 1, 1987, or any loan 
    made pursuant to such section prior to such date that is refinanced 
    pursuant to section 1078-1(d) \1\ or 1078-2(d) of this title, the 
    applicable rate of interest during any 12-month period beginning on 
    July 1 and ending on June 30 shall be determined under subparagraph 
    (B), except that such rate shall not exceed 12 percent.
        (B)(i) For any 12-month period beginning on July 1 and ending on 
    or before June 30, 2001, the rate determined under this subparagraph 
    is determined on the preceding June 1 and is equal to--
            (I) the bond equivalent rate of 52-week Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (II) 3.25 percent.

        (ii) For any 12-month period beginning on July 1 of 2001 or any 
    succeeding year, the rate determined under this subparagraph is 
    determined on the preceding June 26 and is equal to--
            (I) the weekly average 1-year constant maturity Treasury 
        yield, as published by the Board of Governors of the Federal 
        Reserve System, for the last calendar week ending on or before 
        such June 26; plus
            (II) 3.25 percent.

        (C) The Secretary shall determine the applicable rate of 
    interest under subparagraph (B) after consultation with the 
    Secretary of the Treasury and shall publish such rate in the Federal 
    Register as soon as practicable after the date of determination.
        (D) Notwithstanding subparagraph (A)--
            (i) for any loan made pursuant to section 1078-1 \1\ of this 
        title for which the first disbursement is made on or after 
        October 1, 1992--
                (I) subparagraph (B) shall be applied by substituting 
            ``3.1'' for ``3.25''; and
                (II) the interest rate shall not exceed 11 percent; and

            (ii) for any loan made pursuant to section 1078-2 of this 
        title for which the first disbursement is made on or after 
        October 1, 1992--
                (I) subparagraph (B) shall be applied by substituting 
            ``3.1'' for ``3.25''; and
                (II) the interest rate shall not exceed 10 percent.

        (E) Notwithstanding subparagraphs (A) and (D) for any loan made 
    pursuant to section 1078-2 of this title for which the first 
    disbursement is made on or after July 1, 1994--
            (i) subparagraph (B) shall be applied by substituting 
        ``3.1'' for ``3.25''; and
            (ii) the interest rate shall not exceed 9 percent.

(d) Interest rates for new borrowers after July 1, 1988

    Notwithstanding subsections (a) and (b) of this section, with 
respect to any loan (other than a loan made pursuant to sections 1078-
1,\1\ 1078-2, and 1078-3 of this title) to cover the cost of instruction 
for any period of enrollment beginning on or after July 1, 1988, to any 
borrower who, on the date of entering into the note or other written 
evidence of the loan, has no outstanding balance of principal or 
interest on any loan made, insured, or guaranteed under this part, the 
applicable rate of interest shall be--
        (1) 8 percent per year on the unpaid principal balance of the 
    loan during the period beginning on the date of the disbursement of 
    the loan and ending 4 years after the commencement of repayment; and
        (2) 10 percent per year on the unpaid principal balance of the 
    loan during the remainder of the repayment period.

(e) Interest rates for new borrowers after October 1, 1992

                           (1) In general

        Notwithstanding subsections (a), (b), and (d) of this section, 
    with respect to any loan (other than a loan made pursuant to 
    sections 1078-1,\2\ 1078-2 and 1078-3 of this title) for which the 
    first disbursement is made on or after October 1, 1992, to any 
    borrower who, on the date of entering into the note or other written 
    evidence of the loan, has no outstanding balance of principal or 
    interest on any loan made, insured, or guaranteed under section 
    1077, 1078, or 1078-8 of this title, the applicable rate of interest 
    shall, during any 12-month period beginning on July 1 and ending on 
    June 30, be determined on the preceding June 1 and be equal to--
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            (A) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (B) 3.10 percent,

    except that such rate shall not exceed 9 percent.

                          (2) Consultation

        The Secretary shall determine the applicable rate of interest 
    under paragraph (1) after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(f) Interest rates for new loans after July 1, 1994

                           (1) In general

        Notwithstanding subsections (a), (b), (d), and (e) of this 
    section, with respect to any loan made, insured, or guaranteed under 
    this part (other than a loan made pursuant to section 1078-2 or 
    1078-3 of this title) for which the first disbursement is made on or 
    after July 1, 1994, the applicable rate of interest shall, during 
    any 12-month period beginning on July 1 and ending on June 30, be 
    determined on the preceding June 1 and be equal to--
            (A) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (B) 3.10 percent,

    except that such rate shall not exceed 8.25 percent.

                          (2) Consultation

        The Secretary shall determine the applicable rate of interest 
    under paragraph (1) after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(g) In school and grace period rules

                          (1) General rule

        Notwithstanding the provisions of subsection (f) of this 
    section, but subject to subsection (h) of this section, with respect 
    to any loan under section 1078 or 1078-8 of this title for which the 
    first disbursement is made on or after July 1, 1995, the applicable 
    rate of interest for interest which accrues--
            (A) prior to the beginning of the repayment period of the 
        loan; or
            (B) during the period in which principal need not be paid 
        (whether or not such principal is in fact paid) by reason of a 
        provision described in section 1078(b)(1)(M) or 1077(a)(2)(C) of 
        this title,

    shall not exceed the rate determined under paragraph (2).

                       (2) Rate determination

        For purposes of paragraph (1), the rate determined under this 
    paragraph shall, during any 12-month period beginning on July 1 and 
    ending on June 30, be determined on the preceding June 1 and be 
    equal to--
            (A) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction prior to such June 1; plus
            (B) 2.5 percent,

    except that such rate shall not exceed 8.25 percent.

                          (3) Consultation

        The Secretary shall determine the applicable rate of interest 
    under this subsection after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(h) Interest rates for new loans after July 1, 1998

                           (1) In general

        Notwithstanding subsections (a), (b), (d), (e), (f), and (g) of 
    this section, with respect to any loan made, insured, or guaranteed 
    under this part (other than a loan made pursuant to sections 1078-2 
    and 1078-3 of this title) for which the first disbursement is made 
    on or after July 1, 1998, the applicable rate of interest shall, 
    during any 12-month period beginning on July 1 and ending on June 
    30, be determined on the preceding June 1 and be equal to--
            (A) the bond equivalent rate of the securities with a 
        comparable maturity as established by the Secretary; plus
            (B) 1.0 percent,

    except that such rate shall not exceed 8.25 percent.

      (2) Interest rates for new plus loans after July 1, 1998

        Notwithstanding subsections (a), (b), (d), (e), (f), and (g) of 
    this section, with respect to any loan made under section 1078-2 of 
    this title for which the first disbursement is made on or after July 
    1, 1998, paragraph (1) shall be applied--
            (A) by substituting ``2.1 percent'' for ``1.0 percent'' in 
        subparagraph (B); and
            (B) by substituting ``9.0 percent'' for ``8.25 percent'' in 
        the matter following such subparagraph.

                          (3) Consultation

        The Secretary shall determine the applicable rate of interest 
    under this subsection after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(i) Treatment of excess interest payments on new borrower accounts 
        resulting from decline in Treasury bill rates

               (1) Excess interest on 10 percent loans

        If, with respect to a loan for which the applicable interest 
    rate is 10 percent under subsection (d) of this section at the close 
    of any calendar quarter, the sum of the average of the bond 
    equivalent rates of 91-day Treasury bills auctioned for that quarter 
    and 3.25 percent is less than 10 percent, then an adjustment shall 
    be made to a borrower's account--
            (A) by calculating excess interest in the amount computed 
        under paragraph (2) of this subsection; and
            (B)(i) during any period in which a student is eligible to 
        have interest payments paid on his or her behalf by the 
        Government pursuant to section 1078(a) of this title, by 
        crediting the excess interest to the Government; or
            (ii) during any other period, by crediting such excess 
        interest to the reduction of principal to the extent provided in 
        paragraph (5) of this subsection.

            (2) Amount of adjustment for 10 percent loans

        The amount of any adjustment of interest on a loan to be made 
    under this subsection for any quarter shall be equal to--
            (A) 10 percent minus the sum of (i) the average of the bond 
        equivalent rates of 91-day Treasury bills auctioned for such 
        calendar quarter, and (ii) 3.25 percent; multiplied by
            (B) the average daily principal balance of the loan (not 
        including unearned interest added to principal) during such 
        calendar quarter; divided by
            (C) four.

       (3) Excess interest on loans after 1992 amendments, to 
                     borrowers with outstanding balances

        If, with respect to a loan made on or after July 23, 1992, to a 
    borrower, who on the date of entering into the note or other written 
    evidence of the loan, has an outstanding balance of principal or 
    interest on any other loan made, insured, or guaranteed under this 
    part, the sum of the average of the bond equivalent rates of 91-day 
    Treasury bills auctioned for that quarter and 3.1 percent is less 
    than the applicable interest rate, then an adjustment shall be 
    made--
            (A) by calculating excess interest in the amount computed 
        under paragraph (4) of this subsection; and
            (B)(i) during any period in which a student is eligible to 
        have interest payments paid on his or her behalf by the 
        Government pursuant to section 1078(a) of this title, by 
        crediting the excess interest to the Government; or
            (ii) during any other period, by crediting such excess 
        interest to the reduction of principal to the extent provided in 
        paragraph (5) of this subsection.

                      (4) Amount of adjustment

        The amount of any adjustment of interest on a loan to be made 
    under this subsection for any quarter shall be equal to--
            (A) the applicable interest rate minus the sum of (i) the 
        average of the bond equivalent rates of 91-day Treasury bills 
        auctioned for such calendar quarter, and (ii) 3.1 percent; 
        multiplied by
            (B) the average daily principal balance of the loan (not 
        including unearned interest added to principal) during such 
        calendar quarter; divided by
            (C) four.

     (5) Annual adjustment of interest and borrower eligibility 
                                 for credit

        Any adjustment amount computed pursuant to paragraphs (2) and 
    (4) of this subsection for any quarter shall be credited, by the 
    holder of the loan on the last day of the calendar year in which 
    such quarter falls, to the loan account of the borrower so as to 
    reduce the principal balance of such account. No such credit shall 
    be made to the loan account of a borrower who on the last day of the 
    calendar year is delinquent for more than 30 days in making a 
    required payment on the loan, but the excess interest shall be 
    calculated and credited to the Secretary. Any credit which is to be 
    made to a borrower's account pursuant to this subsection shall be 
    made effective commencing no later than 30 days following the last 
    day of the calendar year in which the quarter falls for which the 
    credit is being made. Nothing in this subsection shall be construed 
    to require refunding any repayment of a loan. At the option of the 
    lender, the amount of such adjustment may be distributed to the 
    borrower either by reduction in the amount of the periodic payment 
    on loan, by reducing the number of payments that shall be made with 
    respect to the loan, or by reducing the amount of the final payment 
    of the loan. Nothing in this paragraph shall be construed to require 
    the lender to make additional disclosures pursuant to section 
    1083(b) of this title.

                (6) Publication of Treasury bill rate

        For the purpose of enabling holders of loans to make the 
    determinations and adjustments provided for in this subsection, the 
    Secretary shall for each calendar quarter commencing with the 
    quarter beginning on July 1, 1987, publish a notice of the average 
    of the bond equivalent rates of 91-day Treasury bills auctioned for 
    such quarter. Such notice shall be published not later than 7 days 
    after the end of the quarter to which the notice relates.

                   (7) Conversion to variable rate

        (A) Subject to subparagraphs (C) and (D), a lender or holder 
    shall convert the interest rate on a loan that is made pursuant to 
    this part and is subject to the provisions of this subsection to a 
    variable rate. Such conversion shall occur not later than January 1, 
    1995, and, commencing on the date of conversion, the applicable 
    interest rate for each 12-month period beginning on July 1 and 
    ending on June 30 shall be determined by the Secretary on the June 1 
    preceding each such 12-month period and be equal to the sum of (i) 
    the bond equivalent rate of the 91-day Treasury bills auctioned at 
    the final auction prior to such June 1; and (ii) 3.25 percent in the 
    case of loans described in paragraph (1), or 3.10 percent in the 
    case of loans described in paragraph (3).
        (B) In connection with the conversion specified in subparagraph 
    (A) for any period prior to such conversion, and subject to 
    paragraphs (C) and (D), a lender or holder shall convert the 
    interest rate to a variable rate on a loan that is made pursuant to 
    this part and is subject to the provisions of this subsection to a 
    variable rate. The interest rates for such period shall be reset on 
    a quarterly basis and the applicable interest rate for any quarter 
    or portion thereof shall equal the sum of (i) the average of the 
    bond equivalent rates of 91-Treasury bills auctioned for the 
    preceding 3-month period, and (ii) 3.25 percent in the case of loans 
    described in paragraph (1) or 3.10 percent in the case of loans 
    described in paragraph (3). The rebate of excess interest derived 
    through this conversion shall be provided to the borrower as 
    specified in paragraph (5) for loans described in paragraph (1) or 
    to the Government and borrower as specified in paragraph (3).
        (C) A lender or holder of a loan being converted pursuant to 
    this paragraph shall complete such conversion on or before January 
    1, 1995. The lender or holder shall notify the borrower that the 
    loan shall be converted to a variable interest rate and provide a 
    description of the rate to the borrower not later than 30 days prior 
    to the conversion. The notice shall advise the borrower that such 
    rate shall be calculated in accordance with the procedures set forth 
    in this paragraph and shall provide the borrower with a 
    substantially equivalent benefit as the adjustment otherwise 
    provided for under this subsection. Such notice may be incorporated 
    into the disclosure required under section 1083(b) of this title if 
    such disclosure has not been previously made.
        (D) The interest rate on a loan converted to a variable rate 
    pursuant to this paragraph shall not exceed the maximum interest 
    rate applicable to the loan prior to such conversion.
        (E) Loans on which the interest rate is converted in accordance 
    with subparagraph (A) or (B) shall not be subject to any other 
    provisions of this subsection.

(j) Interest rates for new loans between July 1, 1998 and October 1, 
        1998

                           (1) In general

        Notwithstanding subsection (h) of this section, but subject to 
    paragraph (2), with respect to any loan made, insured, or guaranteed 
    under this part (other than a loan made pursuant to section 1078-2 
    or 1078-3 of this title) for which the first disbursement is made on 
    or after July 1, 1998, and before October 1, 1998, the applicable 
    rate of interest shall, during any 12-month period beginning on July 
    1 and ending on June 30, be determined on the preceding June 1 and 
    be equal to--
            (A) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (B) 2.3 percent,

    except that such rate shall not exceed 8.25 percent.

                (2) In school and grace period rules

        Notwithstanding subsection (h) of this section, with respect to 
    any loan under this part (other than a loan made pursuant to section 
    1078-2 or 1078-3 of this title) for which the first disbursement is 
    made on or after July 1, 1998, and before October 1, 1998, the 
    applicable rate of interest for interest which accrues--
            (A) prior to the beginning of the repayment period of the 
        loan; or
            (B) during the period in which principal need not be paid 
        (whether or not such principal is in fact paid) by reason of a 
        provision described in section 1078(b)(1)(M) or 1077(a)(2)(C) of 
        this title,

    shall be determined under paragraph (1) by substituting ``1.7 
    percent'' for ``2.3 percent''.

                           (3) PLUS loans

        Notwithstanding subsection (h) of this section, with respect to 
    any loan under section 1078-2 of this title for which the first 
    disbursement is made on or after July 1, 1998, and before October 1, 
    1998, the applicable rate of interest shall, during any 12-month 
    period beginning on July 1 and ending on June 30, be determined on 
    the preceding June 1 and be equal to the lesser of--
            (A)(i) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (ii) 3.1 percent; or
            (B) 9.0 percent.

                          (4) Consultation

        The Secretary shall determine the applicable rate of interest 
    under this subsection after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(k) Interest rates for new loans on or after October 1, 1998, and before 
        July 1, 2003

                           (1) In general

        Notwithstanding subsection (h) of this section and subject to 
    paragraph (2) of this subsection, with respect to any loan made, 
    insured, or guaranteed under this part (other than a loan made 
    pursuant to section 1078-2 or 1078-3 of this title) for which the 
    first disbursement is made on or after October 1, 1998, and before 
    July 1, 2003, the applicable rate of interest shall, during any 12-
    month period beginning on July 1 and ending on June 30, be 
    determined on the preceding June 1 and be equal to--
            (A) the bond equivalent rate of 91-day Treasury bills 
        auctioned at the final auction held prior to such June 1; plus
            (B) 2.3 percent,

    except that such rate shall not exceed 8.25 percent.

                (2) In school and grace period rules

        Notwithstanding subsection (h) of this section, with respect to 
    any loan under this part (other than a loan made pursuant to section 
    1078-2 or 1078-3 of this title) for which the first disbursement is 
    made on or after October 1, 1998, and before July 1, 2003, the 
    applicable rate of interest for interest which accrues--
            (A) prior to the beginning of the repayment period of the 
        loan; or
            (B) during the period in which principal need not be paid 
        (whether or not such principal is in fact paid) by reason of a 
        provision described in section 1077(a)(2)(C) or 1078(b)(1)(M) of 
        this title,

    shall be determined under paragraph (1) by substituting ``1.7 
    percent'' for ``2.3 percent''.

                           (3) PLUS loans

        Notwithstanding subsection (h) of this section, with respect to 
    any loan under section 1078-2 of this title for which the first 
    disbursement is made on or after October 1, 1998, and before July 1, 
    2003, the applicable rate of interest shall be determined under 
    paragraph (1)--
            (A) by substituting ``3.1 percent'' for ``2.3 percent''; and
            (B) by substituting ``9.0 percent'' for ``8.25 percent''.

                       (4) Consolidation loans

        With respect to any consolidation loan under section 1078-3 of 
    this title for which the application is received by an eligible 
    lender on or after October 1, 1998, and before July 1, 2003, 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.

                          (5) Consultation

        The Secretary shall determine the applicable rate of interest 
    under this subsection after consultation with the Secretary of the 
    Treasury and shall publish such rate in the Federal Register as soon 
    as practicable after the date of determination.

(l) Lesser rates permitted

    Nothing in this section or section 1078-3 of this title shall be 
construed to prohibit a lender from charging a borrower interest at a 
rate less than the rate which is applicable under this part.

(m) Definitions

    For the purpose of subsections (a) and (d) of this section--
        (1) the term ``period of instruction'' shall, at the discretion 
    of the lender, be any academic year, semester, trimester, quarter, 
    or other academic period; or shall be the period for which the loan 
    is made as determined by the institution of higher education; and
        (2) the term ``period of enrollment'' shall be the period for 
    which the loan is made as determined by the institution of higher 
    education and shall coincide with academic terms such as academic 
    year, semester, trimester, quarter, or other academic period as 
    defined by such institution.

(Pub. L. 89-329, title IV, Sec. 427A, as added Pub. L. 99-498, title IV, 
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1364; amended Pub. L. 100-50, 
Sec. 10(d)(1), June 3, 1987, 101 Stat. 342; Pub. L. 102-325, title IV, 
Sec. 415, July 23, 1992, 106 Stat. 514; Pub. L. 103-66, title IV, 
Sec. 4101, Aug. 10, 1993, 107 Stat. 364; Pub. L. 103-208, Sec. 2(c)(5)-
(10), Dec. 20, 1993, 107 Stat. 2461; Pub. L. 105-178, title VIII, 
Sec. 8301(a)(1), June 9, 1998, 112 Stat. 496; Pub. L. 105-244, title IV, 
Sec. 416(a)(1), Oct. 7, 1998, 112 Stat. 1679; Pub. L. 106-554, 
Sec. 1(a)(1) [title III, Sec. 318(a)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-49.)

                       References in Text

    Section 1078-1 of this title, referred to in subsecs. (c) to (e)(1), 
was repealed by Pub. L. 103-66, title IV, Sec. 4047(b)-(d), Aug. 10, 
1993, 107 Stat. 364, eff. July 1, 1994, except with respect to loans 
provided under that section as it existed prior to Aug. 10, 1993. 
Subsequently, a new section 1078-1, relating to voluntary flexible 
agreements with guaranty agencies, was enacted by Pub. L. 105-244, title 
IV, Sec. 418, Oct. 7, 1998, 112 Stat. 1691.

                          Codification

    Amendments by section 2(c)(6)-(10) of Pub. L. 103-208 (which were 
effective as if included in Pub. L. 102-325) were executed to this 
section as amended by Pub. L. 102-325 and Pub. L. 103-66, to reflect the 
probable intent of Congress.


                            Prior Provisions

    A prior section 1077a, Pub. L. 89-329, title IV, Sec. 427A, as added 
Pub. L. 96-374, title IV, Sec. 415(a)(1), Oct. 3, 1980, 94 Stat. 1419; 
amended Pub. L. 97-35, title V, Sec. 534(a)(1), Aug. 13, 1981, 95 Stat. 
454; Pub. L. 98-79, Sec. 5(a), (b)(1), Aug. 15, 1983, 97 Stat. 481, 482, 
prescribed applicable interest rates on loans, prior to the general 
revision of this part by Pub. L. 99-498.


                               Amendments

    2000--Subsec. (c)(4)(B). Pub. L. 106-554 amended subpar. (B) 
generally. Prior to amendment, subpar. (B) read as follows: ``For any 
12-month period beginning on July 1 and ending on June 30, the rate 
determined under this subparagraph is determined on the preceding June 1 
and is equal to--
        ``(i) the bond equivalent rate of 52-week Treasury bills 
    auctioned at the final auction held prior to such June 1; plus
        ``(ii) 3.25 percent.''
    1998--Subsec. (j). Pub. L. 105-178, Sec. 8301(a)(1)(B), added 
subsec. (j). Former subsec. (j) redesignated (k).
    Subsec. (k). Pub. L. 105-244, Sec. 416(a)(1)(B), added subsec. (k). 
Former subsec. (k) redesignated (l).
    Pub. L. 105-178, Sec. 8301(a)(1)(A), redesignated subsec. (j) as 
(k). Former subsec. (k) redesignated (l).
    Subsec. (l). Pub. L. 105-244, Sec. 416(a)(1)(A), redesignated 
subsec. (k) as (l). Former subsec. (l) redesignated (m).
    Pub. L. 105-178, Sec. 8301(a)(1)(A), redesignated subsec. (k) as 
(l).
    Subsec. (m). Pub. L. 105-244, Sec. 416(a)(1)(A), redesignated 
subsec. (l) as (m).
    1993--Subsec. (c)(4)(E). Pub. L. 103-66, Sec. 4101(1), added subpar. 
(E).
    Subsec. (e)(1). Pub. L. 103-208, Sec. 2(c)(5), substituted ``under 
section 1077, 1078, or 1078-8 of this title'' for ``under this part''.
    Subsecs. (f) to (h). Pub. L. 103-66, Sec. 4101(3), added subsecs. 
(f) to (h). Former subsecs. (f) to (h) redesignated (i) to (k), 
respectively.
    Subsec. (i). Pub. L. 103-66, Sec. 4101(2), redesignated subsec. (f) 
as (i).
    Subsec. (i)(1)(B). Pub. L. 103-208, Sec. 2(c)(6), amended subpar. 
(B) generally. Prior to amendment, subpar. (B) read as follows: ``by 
crediting the excess interest to the reduction of principal to the 
extent provided for under paragraph (5) of this subsection.'' See 
Codification note above.
    Subsec. (i)(2)(B). Pub. L. 103-208, Sec. 2(c)(7), substituted 
``average daily principal balance'' for ``outstanding principal 
balance'' and ``during'' for ``at the end of''. See Codification note 
above.
    Subsec. (i)(4)(B). Pub. L. 103-208, Sec. 2(c)(8), substituted 
``average daily principal balance'' for ``outstanding principal 
balance'' and ``during'' for ``at the end of''. See Codification note 
above.
    Subsec. (i)(5). Pub. L. 103-208, Sec. 2(c)(9)(A)(i), (B), 
substituted ``paragraphs (2) and (4)'' for ``paragraph (2)'' in first 
sentence and inserted ``, but the excess interest shall be calculated 
and credited to the Secretary'' after ``required payment on the loan'' 
in second sentence. See Codification note above.
    Pub. L. 103-208, Sec. 2(c)(9)(A)(ii), which directed substitution of 
``principal'' for ``principle'' in first sentence, could not be executed 
because the word ``principle'' does not appear in text.
    Subsec. (i)(7). Pub. L. 103-208, Sec. 2(c)(10), added par. (7). See 
Codification note above.
    Subsecs. (j), (k). Pub. L. 103-66, Sec. 4101(2), redesignated 
subsecs. (g) and (h) as (j) and (k), respectively.
    1992--Subsec. (c)(4)(D). Pub. L. 102-325, Sec. 415(a), added subpar. 
(D).
    Subsec. (e). Pub. L. 102-325, Sec. 415(c)(2), added subsec. (e). 
Former subsec. (e) redesignated (f).
    Pub. L. 102-325, Sec. 415(b), amended par. (1) heading and 
substituted ``paragraph (5)'' for ``paragraph (3)'' in par. (1)(B), 
amended par. (2) heading, added pars. (3) and (4), redesignated former 
par. (3) as (5), struck out ``or'' before ``by reducing the number'' and 
inserted ``, or by reducing the amount of the final payment of the loan. 
Nothing in this paragraph shall be construed to require the lender to 
make additional disclosures pursuant to section 1083(b) of this title'' 
before period at end, redesignated former par. (4) as (6), and struck 
out former par. (5) which provided for study of treatment of excess 
interest payments provisions.
    Subsecs. (f) to (h). Pub. L. 102-325, Sec. 415(c)(1), redesignated 
subsecs. (e) to (g) as (f) to (h), respectively.
    1987--Subsec. (c)(4)(A). Pub. L. 100-50, Sec. 10(d)(1)(A), (B), 
substituted ``and disbursed on or after July 1, 1987'' for ``to cover 
the cost of instruction for any period of enrollment beginning on or 
after July 1, 1987'' and ``any 12-month period beginning on or after 
July 1 and ending on June 30'' for ``any calendar year''.
    Subsec. (c)(4)(B). Pub. L. 100-50, Sec. 10(d)(1)(C), added subpar. 
(B) and struck out former subpar. (B) which read as follows: ``For any 
calendar year, the rate determined under this subparagraph is determined 
on December 15 preceding such calendar year and is equal to--
        ``(i) the average of the bond equivalent rates of 91-day 
    Treasury bills auctioned during the 12 months ending on November 30 
    preceding such calendar year; plus
        ``(ii) 3.75 percent.''


                    Effective Date of 1998 Amendment

    Pub. L. 105-244, title IV, Sec. 416(c), Oct. 7, 1998, 112 Stat. 
1682, provided that: ``The amendments made by this section [amending 
this section and sections 1078-2, 1078-3, and 1087-1 of this title] 
shall apply with respect to any loan made, insured, or guaranteed under 
part B of title IV of the Higher Education Act of 1965 [20 U.S.C. 1071 
et seq.] for which the first disbursement is made on or after October 1, 
1998, and before July 1, 2003, except that such amendments shall apply 
with respect to any loan made under section 428C of such Act [20 U.S.C. 
1078-3] for which the application is received by an eligible lender on 
or after October 1, 1998, and before July 1, 2003.''


                    Effective Date of 1993 Amendment

    Amendment by section 2(c)(5) of Pub. L. 103-208 effective on and 
after Dec. 20, 1993, and amendment by section 2(c)(6)-(10) of Pub. L. 
103-208 effective, except as otherwise provided, as if included in the 
Higher Education Amendments of 1992, Pub. L. 102-325, see section 5(a), 
(b)(2) of Pub. L. 103-208, set out as a note under section 1051 of this 
title.


                    Effective Date of 1987 Amendment

    Amendment by Pub. L. 100-50 effective as if enacted as part of the 
Higher Education Amendments of 1986, Pub. L. 99-498, see section 27 of 
Pub. L. 100-50, set out as a note under section 1001 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1077, 1078, 1078-2, 1078-3, 
1078-8, 1087-1 of this title; title 42 section 7274e.
