 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1078-3. Federal consolidation loans


(a) Agreements with eligible lenders

            (1) Agreement required for insurance coverage

        For the purpose of providing loans to eligible borrowers for 
    consolidation of their obligations with respect to eligible student 
    loans, the Secretary or a guaranty agency shall enter into 
    agreements in accordance with subsection (b) of this section with 
    the following eligible lenders:
            (A) the Student Loan Marketing Association or the Holding 
        Company of the Student Loan Marketing Association, including any 
        subsidiary of the Holding Company, created pursuant to section 
        1087-3 of this title;
            (B) State agencies described in subparagraphs (D) and (F) of 
        section 1085(d)(1) of this title; and
            (C) other eligible lenders described in subparagraphs (A), 
        (B), (C), (E), and (J) of such section.

            (2) Insurance coverage of consolidation loans

        Except as provided in section 1079(e) of this title, no contract 
    of insurance under this part shall apply to a consolidation loan 
    unless such loan is made under an agreement pursuant to this section 
    and is covered by a certificate issued in accordance with subsection 
    (b)(2) of this section. Loans covered by such a certificate that is 
    issued by a guaranty agency shall be considered to be insured loans 
    for the purposes of reimbursements under section 1078(c) of this 
    title, but no payment shall be made with respect to such loans under 
    section 1078(f) of this title to any such agency.

                 (3) Definition of eligible borrower

        (A) For the purpose of this section, the term ``eligible 
    borrower'' means a borrower who--
            (i) is not subject to a judgment secured through litigation 
        with respect to a loan under this subchapter and part C of 
        subchapter I of chapter 34 of title 42 or to an order for wage 
        garnishment under section 1095a of this title; and
            (ii) at the time of application for a consolidation loan--
                (I) is in repayment status;
                (II) is in a grace period preceding repayment; or
                (III) is a defaulted borrower who has made arrangements 
            to repay the obligation on the defaulted loans satisfactory 
            to the holders of the defaulted loans.

        (B)(i) \1\ An individual's status as an eligible borrower under 
    this section terminates upon receipt of a consolidation loan under 
    this section, except that--
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    \1\ So in original. No cl. (ii) has been enacted.
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            (I) an individual who receives eligible student loans after 
        the date of receipt of the consolidation loan may receive a 
        subsequent consolidation loan;
            (II) loans received prior to the date of the consolidation 
        loan may be added during the 180-day period following the making 
        of the consolidation loan;
            (III) loans received following the making of the 
        consolidation loan may be added during the 180-day period 
        following the making of the consolidation loan; and
            (IV) loans received prior to the date of the first 
        consolidation loan may be added to a subsequent consolidation 
        loan.

        (C)(i) A married couple, each of whom has eligible student 
    loans, may be treated as if such couple were an individual borrowing 
    under subparagraphs (A) and (B) if such couple agrees to be held 
    jointly and severally liable for the repayment of a consolidation 
    loan, without regard to the amounts of the respective loan 
    obligations that are to be consolidated, and without regard to any 
    subsequent change that may occur in such couple's marital status.
        (ii) Only one spouse in a married couple applying for a 
    consolidation loan under this subparagraph need meet any of the 
    requirements of subsection (b) of this section, except that each 
    spouse shall--
            (I) individually make the initial certification that no 
        other application is pending in accordance with subsection 
        (b)(1)(A) of this section; and
            (II) agree to notify the holder concerning any change of 
        address in accordance with subsection (b)(4) of this section.

               (4) ``Eligible student loans'' defined

        For the purpose of paragraph (1), the term ``eligible student 
    loans'' means loans--
            (A) made, insured, or guaranteed under this part, including 
        loans on which the borrower has defaulted (but has made 
        arrangements to repay the obligation on the defaulted loans 
        satisfactory to the Secretary or guaranty agency, whichever 
        insured the loans);
            (B) made under part D of this subchapter;
            (C) made under part C of this subchapter;
            (D) made under subpart II of part A of title VII of the 
        Public Health Service Act [42 U.S.C. 292q et seq.]; or
            (E) made under subpart II of part B of title VIII of the 
        Public Health Service Act [42 U.S.C. 297a et seq.].

(b) Contents of agreements, certificates of insurance, and loan notes

                     (1) Agreements with lenders

        Any lender described in subparagraph (A), (B), or (C) of 
    subsection (a)(1) of this section who wishes to make consolidation 
    loans under this section shall enter into an agreement with the 
    Secretary or a guaranty agency which provides--
            (A) that, in the case of all lenders described in subsection 
        (a)(1) of this section, the lender will make a consolidation 
        loan to an eligible borrower (on request of that borrower) only 
        if the borrower certifies that the borrower has no other 
        application pending for a loan under this section and (i) the 
        lender holds an outstanding loan of that borrower which is 
        selected by the borrower for consolidation under this section, 
        except that this clause shall not apply in the case of a 
        borrower with multiple holders of loans under this part, or (ii) 
        the borrower certifies that the borrower has sought and has been 
        unable to obtain a consolidation loan with income-sensitive 
        repayment terms from the holders of the outstanding loans of 
        that borrower (which are so selected for consolidation);
            (B) that each consolidation loan made by the lender will 
        bear interest, and be subject to repayment, in accordance with 
        subsection (c) of this section;
            (C) that each consolidation loan will be made, 
        notwithstanding any other provision of this part limiting the 
        annual or aggregate principal amount for all insured loans made 
        to a borrower, in an amount (i) which is not less than the 
        minimum amount required for eligibility of the borrower under 
        subsection (a)(3) of this section, and (ii) which is equal to 
        the sum of the unpaid principal and accrued unpaid interest and 
        late charges of all eligible student loans received by the 
        eligible borrower which are selected by the borrower for 
        consolidation;
            (D) that the proceeds of each consolidation loan will be 
        paid by the lender to the holder or holders of the loans so 
        selected to discharge the liability on such loans;
            (E) that the lender shall offer an income-sensitive 
        repayment schedule, established by the lender in accordance with 
        the regulations promulgated by the Secretary, to the borrower of 
        any consolidation loan made by the lender on or after July 1, 
        1994; and
            (F) such other terms and conditions as the Secretary or the 
        guaranty agency may specifically require of the lender to carry 
        out this section.

       (2) Issuance of certificate of comprehensive insurance 
                                  coverage

        The Secretary shall issue a certificate of comprehensive 
    insurance coverage under section 1079(b) of this title to a lender 
    which has entered into an agreement with the Secretary under 
    paragraph (1) of this subsection. The guaranty agency may issue a 
    certificate of comprehensive insurance coverage to a lender with 
    which it has an agreement under such paragraph. The Secretary shall 
    not issue a certificate to a lender described in subparagraph (B) or 
    (C) of subsection (a)(1) of this section unless the Secretary 
    determines that such lender has first applied to, and has been 
    denied a certificate of insurance by, the guaranty agency which 
    insures the preponderance of its loans (by value).

                     (3) Contents of certificate

        A certificate issued under paragraph (2) shall, at a minimum, 
    provide--
            (A) that all consolidation loans made by such lender in 
        conformity with the requirements of this section will be insured 
        by the Secretary or the guaranty agency (whichever is 
        applicable) against loss of principal and interest;
            (B) that a consolidation loan will not be insured unless the 
        lender has determined to its satisfaction, in accordance with 
        reasonable and prudent business practices, for each loan being 
        consolidated--
                (i) that the loan is a legal, valid, and binding 
            obligation of the borrower;
                (ii) that each such loan was made and serviced in 
            compliance with applicable laws and regulations; and
                (iii) in the case of loans under this part, that the 
            insurance on such loan is in full force and effect;

            (C) the effective date and expiration date of the 
        certificate;
            (D) the aggregate amount to which the certificate applies;
            (E) the reporting requirements of the Secretary on the 
        lender and an identification of the office of the Department of 
        Education or of the guaranty agency which will process claims 
        and perform other related administrative functions;
            (F) the alternative repayment terms which will be offered to 
        borrowers by the lender;
            (G) that, if the lender prior to the expiration of the 
        certificate no longer proposes to make consolidation loans, the 
        lender will so notify the issuer of the certificate in order 
        that the certificate may be terminated (without affecting the 
        insurance on any consolidation loan made prior to such 
        termination); and
            (H) the terms upon which the issuer of the certificate may 
        limit, suspend, or terminate the lender's authority to make 
        consolidation loans under the certificate (without affecting the 
        insurance on any consolidation loan made prior to such 
        limitation, suspension, or termination).

                  (4) Terms and conditions of loans

        A consolidation loan made pursuant to this section shall be 
    insurable by the Secretary or a guaranty agency pursuant to 
    paragraph (2) only if the loan is made to an eligible borrower who 
    has agreed to notify the holder of the loan promptly concerning any 
    change of address and the loan is evidenced by a note or other 
    written agreement which--
            (A) is made without security and without endorsement, except 
        that if the borrower is a minor and such note or other written 
        agreement executed by him or her would not, under applicable 
        law, create a binding obligation, endorsement may be required;
            (B) provides for the payment of interest and the repayment 
        of principal in accordance with subsection (c) of this section;
            (C)(i) provides that periodic installments of principal need 
        not be paid, but interest shall accrue and be paid in accordance 
        with clause (ii), during any period for which the borrower would 
        be eligible for a deferral under section 1078(b)(1)(M) of this 
        title, and that any such period shall not be included in 
        determining the repayment schedule pursuant to subsection (c)(2) 
        of this section; and
            (ii) provides that interest shall accrue and be paid during 
        any such period--
                (I) by the Secretary, in the case of a consolidation 
            loan for which the application is received by an eligible 
            lender before November 13, 1997, that consolidated only 
            Federal Stafford Loans for which the student borrower 
            received an interest subsidy under section 1078 of this 
            title;
                (II) by the Secretary, in the case of a consolidation 
            loan for which the application is received by an eligible 
            lender on or after November 13, 1997, except that the 
            Secretary shall pay such interest only on that portion of 
            the loan that repays Federal Stafford Loans for which the 
            student borrower received an interest subsidy under section 
            1078 of this title or Federal Direct Stafford Loans for 
            which the borrower received an interest subsidy under 
            section 1087e of this title; or
                (III) by the borrower, or capitalized, in the case of a 
            consolidation loan other than a loan described in subclause 
            (I) or (II);

            (D) entitles the borrower to accelerate without penalty 
        repayment of the whole or any part of the loan; and
            (E)(i) contains a notice of the system of disclosure 
        concerning such loan to credit bureau organizations under 
        section 1080a of this title, and (ii) provides that the lender 
        on request of the borrower will provide information on the 
        repayment status of the note to such organizations.

                          (5) Direct loans

        In the event that a borrower is unable to obtain a consolidation 
    loan from a lender with an agreement under subsection (a)(1) of this 
    section, or is unable to obtain a consolidation loan with income-
    sensitive repayment terms acceptable to the borrower from such a 
    lender, the Secretary shall offer any such borrower who applies for 
    it, a direct consolidation loan. Such direct consolidation loan 
    shall, as requested by the borrower, be repaid either pursuant to 
    income contingent repayment under part C of this subchapter or 
    pursuant to any other repayment provision under this section. The 
    Secretary shall not offer such loans if, in the Secretary's 
    judgment, the Department of Education does not have the necessary 
    origination and servicing arrangements in place for such loans.

             (6) Nondiscrimination in loan consolidation

        An eligible lender that makes consolidation loans under this 
    section shall not discriminate against any borrower seeking such a 
    loan--
            (A) based on the number or type of eligible student loans 
        the borrower seeks to consolidate, except that a lender is not 
        required to consolidate loans described in subparagraph (D) or 
        (E) of subsection (a)(4) of this section or subsection 
        (d)(1)(C)(ii) of this section;
            (B) based on the type or category of institution of higher 
        education that the borrower attended;
            (C) based on the interest rate to be charged to the borrower 
        with respect to the consolidation loan; or
            (D) with respect to the types of repayment schedules offered 
        to such borrower.

(c) Payment of principal and interest

                          (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 on or after October 1, 1998, and 
    before July 1, 2003, the applicable interest rate shall be 
    determined under section 1077a(k)(4) of this title.
        (B) A consolidation loan made before July 1, 1994, shall bear 
    interest at an annual rate on the unpaid principal balance of the 
    loan that is equal to the greater of--
            (i) the weighted average of the interest rates on the loans 
        consolidated, rounded to the nearest whole percent; or
            (ii) 9 percent.

        (C) A consolidation loan made on or after July 1, 1994, shall 
    bear interest at an annual rate on the unpaid principal balance of 
    the loan that is equal to the weighted average of the interest rates 
    on the loans consolidated, rounded upward to the nearest whole 
    percent.
        (D) A consolidation loan for which the application is received 
    by an eligible lender on or after November 13, 1997, and before 
    October 1, 1998, shall bear interest at an annual rate on the unpaid 
    principal balance of the loan that is equal to the rate specified in 
    section 1077a(f) of this title, except that the eligible lender may 
    continue to calculate interest on such a loan at the rate previously 
    in effect and defer, until not later than April 1, 1998, the 
    recalculation of the interest on such a loan at the rate required by 
    this subparagraph if the recalculation is applied retroactively to 
    the date on which the loan is made.

                       (2) Repayment schedules

        (A) Notwithstanding any other provision of this part, to the 
    extent authorized by its certificate of insurance under subsection 
    (b)(2)(F) of this section and approved by the issuer of such 
    certificate, the lender of a consolidation loan shall establish 
    repayment terms as will promote the objectives of this section, 
    which shall include the establishment of graduated or income-
    sensitive repayment schedules, established by the lender in 
    accordance with the regulations of the Secretary. Except as required 
    by such income-sensitive repayment schedules, or by the terms of 
    repayment pursuant to income contingent repayment offered by the 
    Secretary under subsection (b)(5) of this section, such repayment 
    terms shall require that if the sum of the consolidation loan and 
    the amount outstanding on other student loans to the individual--
            (i) is less than $7,500, then such consolidation loan shall 
        be repaid in not more than 10 years;
            (ii) is equal to or greater than $7,500 but less than 
        $10,000, then such consolidation loan shall be repaid in not 
        more than 12 years;
            (iii) is equal to or greater than $10,000 but less than 
        $20,000, then such consolidation loan shall be repaid in not 
        more than 15 years;
            (iv) is equal to or greater than $20,000 but less than 
        $40,000, then such consolidation loan shall be repaid in not 
        more than 20 years;
            (v) is equal to or greater than $40,000 but less than 
        $60,000, then such consolidation loan shall be repaid in not 
        more than 25 years; or
            (vi) is equal to or greater than $60,000, then such 
        consolidation loan shall be repaid in not more than 30 years.

        (B) The amount outstanding on other student loans which may be 
    counted for the purpose of subparagraph (A) may not exceed the 
    amount of the consolidation loan.

                (3) Additional repayment requirements

        Notwithstanding paragraph (2)--
            (A) a repayment schedule established with respect to a 
        consolidation loan shall require that the minimum installment 
        payment be an amount equal to not less than the accrued unpaid 
        interest; and
            (B) except as required by the terms of repayment pursuant to 
        income contingent repayment offered by the Secretary under 
        subsection (b)(5) of this section, the lender of a consolidation 
        loan may, with respect to repayment on the loan, when the amount 
        of a monthly or other similar payment on the loan is not a 
        multiple of $5, round the payment to the next highest whole 
        dollar amount that is a multiple of $5.

                    (4) Commencement of repayment

        Repayment of a consolidation loan shall commence within 60 days 
    after all holders have, pursuant to subsection (b)(1)(D) of this 
    section, discharged the liability of the borrower on the loans 
    selected for consolidation.

                  (5) Insurance premiums prohibited

        No insurance premium shall be charged to the borrower on any 
    consolidation loan, and no insurance premium shall be payable by the 
    lender to the Secretary with respect to any such loan, but a fee may 
    be payable by the lender to the guaranty agency to cover the costs 
    of increased or extended liability with respect to such loan.

(d) Special program authorized

      (1) General rule and definition of eligible student loan

        (A) In general

            Subject to the provisions of this subsection, the Secretary 
        or a guaranty agency shall enter into agreements with eligible 
        lenders described in subparagraphs (A), (B), and (C) of 
        subsection (a)(1) of this section for the consolidation of 
        eligible student loans.

        (B) Applicability rule

            Unless otherwise provided in this subsection, the agreements 
        entered into under subparagraph (A) and the loans made under 
        such agreements for the consolidation of eligible student loans 
        under this subsection shall have the same terms, conditions, and 
        benefits as all other agreements and loans made under this 
        section.

        (C) ``Eligible student loans'' defined

            For the purpose of this subsection, the term ``eligible 
        student loans'' means loans--
                (i) of the type described in subparagraphs (A), (B), and 
            (C) of subsection (a)(4) of this section; and
                (ii) made under subpart I of part A of title VII of the 
            Public Health Service Act [42 U.S.C. 292 et seq.].

                       (2) Interest rate rule

        (A) In general

            The portion of each consolidated loan that is attributable 
        to an eligible student loan described in paragraph (1)(C)(ii) 
        shall bear interest at a rate not to exceed the rate determined 
        under subparagraph (B).

        (B) Determination of the maximum interest rate

            For the 12-month period beginning after July 1, 1992, and 
        for each 12-month period thereafter, beginning on July 1 and 
        ending on June 30, the interest rate applicable under 
        subparagraph (A) shall be equal to the average of the bond 
        equivalent rates of the 91-day Treasury bills auctioned for the 
        quarter prior to July 1, for each 12-month period for which the 
        determination is made, plus 3 percent.

        (C) Publication of maximum interest rate

            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 such 
        determination.

                          (3) Special rules

        (A) No special allowance rule

            No special allowance under section 1087-1 of this title 
        shall be paid with respect to the portion of any consolidated 
        loan under this subsection that is attributable to any loan 
        described in paragraph (1)(C)(ii).

        (B) No interest subsidy rule

            No interest subsidy under section 1078(a) of this title 
        shall be paid on behalf of any eligible borrower for any portion 
        of a consolidated loan under this subsection that is 
        attributable to any loan described in paragraph (1)(C)(ii).

        (C) Additional reserve rule

            Notwithstanding any other provision of this chapter, 
        additional reserves shall not be required for any guaranty 
        agency with respect to a loan made under this subsection.

        (D) Insurance rule

            Any insurance premium paid by the borrower under subpart I 
        of part A of title VII of the Public Health Service Act [42 
        U.S.C. 292 et seq.] with respect to a loan made under that 
        subpart and consolidated under this subsection shall be retained 
        by the student loan insurance fund established under section 710 
        of the Public Health Service Act [42 U.S.C. 292i].

                           (4) Regulations

        The Secretary is authorized to promulgate such regulations as 
    may be necessary to facilitate carrying out the provisions of this 
    subsection.

(e) Termination of authority

    The authority to make loans under this section expires at the close 
of September 30, 2004. Nothing in this section shall be construed to 
authorize the Secretary to promulgate rules or regulations governing the 
terms or conditions of the agreements and certificates under subsection 
(b) of this section. Loans made under this section which are insured by 
the Secretary shall be considered to be new loans made to students for 
the purpose of section 1074(a) of this title.

(f) Interest payment rebate fee

                           (1) In general

        For any month beginning on or after October 1, 1993, each holder 
    of a consolidation loan under this section for which the first 
    disbursement was made on or after October 1, 1993, shall pay to the 
    Secretary, on a monthly basis and in such manner as the Secretary 
    shall prescribe, a rebate fee calculated on an annual basis equal to 
    1.05 percent of the principal plus accrued unpaid interest on such 
    loan.

                          (2) Special rule

        For consolidation loans based on applications received during 
    the period from October 1, 1998 through January 31, 1999, inclusive, 
    the rebate described in paragraph (1) shall be equal to 0.62 percent 
    of the principal plus accrued unpaid interest on such loan.

                             (3) Deposit

        The Secretary shall deposit all fees collected pursuant to 
    subsection (a) of this section into the insurance fund established 
    in section 1081 of this title.

(Pub. L. 89-329, title IV, Sec. 428C, as added Pub. L. 99-498, title IV, 
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1388; amended Pub. L. 100-50, 
Sec. 10(s), June 3, 1987, 101 Stat. 345; Pub. L. 102-325, title IV, 
Sec. 419, July 23, 1992, 106 Stat. 532; Pub. L. 102-408, title III, 
Sec. 306(a), (b), Oct. 13, 1992, 106 Stat. 2084, 2086; Pub. L. 103-66, 
title IV, Secs. 4046(a), (b)(2), 4106(a), Aug. 10, 1993, 107 Stat. 360, 
363, 368; Pub. L. 103-208, Sec. 2(c)(33)-(37), Dec. 20, 1993, 107 Stat. 
2466; Pub. L. 103-382, title III, Sec. 356, Oct. 20, 1994, 108 Stat. 
3967; Pub. L. 104-208, div. A, title I, Sec. 101(e) [title VI, 
Sec. 602(b)(1)(A)(ii)], Sept. 30, 1996, 110 Stat. 3009-233, 3009-283; 
Pub. L. 105-33, title VI, Sec. 6104(3), Aug. 5, 1997, 111 Stat. 652; 
Pub. L. 105-78, title VI, Sec. 609(b)-(e), Nov. 13, 1997, 111 Stat. 
1522, 1523; Pub. L. 105-244, title IV, Secs. 416(b)(2), 420, Oct. 7, 
1998, 112 Stat. 1682, 1695.)

                       References in Text

    The Public Health Service Act, referred to in subsecs. (a)(4)(D), 
(E) and (d)(1)(C)(ii), (3)(D), is act July 1, 1944, ch. 373, 58 Stat. 
682, as amended. Subparts I and II of part A of title VII of the Act are 
classified generally to subpart I (Sec. 292 et seq.) and subpart II 
(Sec. 292q et seq.), respectively, of part A of subchapter V of chapter 
6A of Title 42, The Public Health and Welfare. Subpart II of part B of 
title VIII of the Act, which was classified generally to subpart II 
(Sec. 297a et seq.) of part B of subchapter VI of chapter 6A of Title 
42, was redesignated as part E of subchapter VI of chapter 6A of Title 
42, by Pub. L. 105-392, title I, Sec. 123(2), Nov. 13, 1998, 112 Stat. 
3562. For complete classification of this Act to the Code, see Short 
Title note set out under section 201 of Title 42 and Tables.
    This chapter, referred to in subsec. (d)(3)(C), was in the original 
``this Act'', meaning Pub. L. 89-329, as amended, known as the Higher 
Education Act of 1965. For complete classification of this Act to the 
Code, see Short Title note set out under section 1001 of this title and 
Tables.

                          Codification

    Amendments by section 2(c)(33), (36) 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 1078-3, Pub. L. 89-329, title IV, Sec. 428C, as 
added Pub. L. 99-272, title XVI, Sec. 16017(a), Apr. 7, 1986, 100 Stat. 
343, related to consolidation loans, prior to the general revision of 
this part by Pub. L. 99-498.


                               Amendments

    1998--Subsec. (a)(3). Pub. L. 105-244, Sec. 420(a), amended heading, 
added subpars. (A) and (B), and struck out former subpars. (A) and (B) 
which defined the term ``eligible borrower'', provided for termination 
of individual's status as an eligible borrower, and provided for 
counting loans against certain limitations on aggregate indebtedness.
    Subsec. (a)(4)(C). Pub. L. 105-244, Sec. 420(b), added subpar. (C) 
and struck out former subpar. (C) which read as follows: ``made under 
part C of this subchapter, except that loans made under such part shall 
be eligible student loans only for consolidation loans for which the 
application is received by an eligible lender during the period 
beginning on November 13, 1997, and ending on October 1, 1998;''.
    Subsec. (b)(1)(A)(i). Pub. L. 105-244, Sec. 420(c)(1), inserted 
``except that this clause shall not apply in the case of a borrower with 
multiple holders of loans under this part,'' after ``under this 
section,''.
    Subsec. (b)(4)(C)(ii). Pub. L. 105-244, Sec. 420(c)(2), inserted 
``during any such period'' after ``and be paid'' in introductory 
provisions and struck out ``, or on or after October 1, 1998,'' before 
``that consolidated'' in subcl. (I) and ``and before October 1, 1998,'' 
before ``except that'' in subcl. (II).
    Subsec. (b)(6)(A). Pub. L. 105-244, Sec. 420(c)(3), inserted before 
semicolon at end ``, except that a lender is not required to consolidate 
loans described in subparagraph (D) or (E) of subsection (a)(4) of this 
section or subsection (d)(1)(C)(ii) of this section''.
    Subsec. (c)(1). Pub. L. 105-244, Sec. 420(b)(2), amended heading, 
added subpar. (A), and struck out former subpar. (A) which read as 
follows: ``Consolidation loans made under this section shall bear 
interest at rates determined under subparagraph (B), (C), or (D). For 
the purposes of payment of special allowances under section 1087-1(b)(2) 
of this title, the interest rate required by this subsection is the 
applicable interest rate with respect to a consolidation loan.''
    Subsec. (e). Pub. L. 105-244, Sec. 420(d), substituted ``September 
30, 2004'' for ``September 30, 2002''.
    Subsec. (f)(2), (3). Pub. L. 105-244, Sec. 420(e), added par. (2) 
and redesignated former par. (2) as (3).
    1997--Subsec. (a)(4)(C) to (E). Pub. L. 105-78, Sec. 609(b), added 
subpar. (C) and redesignated former subpars. (C) and (D) as (D) and (E), 
respectively.
    Subsec. (b)(4)(C)(ii)(I). Pub. L. 105-78, Sec. 609(c)(1), (2), 
inserted ``for which the application is received by an eligible lender 
before November 13, 1997, or on or after October 1, 1998,'' after 
``consolidation loan'' and struck out ``or'' at end.
    Subsec. (b)(4)(C)(ii)(II), (III). Pub. L. 105-78, Sec. 609(c)(3)-
(5), added subcl. (II) and redesignated former subcl. (II) as (III) and 
inserted ``or (II)'' before semicolon at end.
    Subsec. (b)(6). Pub. L. 105-78, Sec. 609(d), added par. (6).
    Subsec. (c)(1)(A). Pub. L. 105-78, Sec. 609(e)(1), substituted 
``subparagraph (B), (C), or (D)'' for ``subparagraph (B) or (D)''.
    Subsec. (c)(1)(D). Pub. L. 105-78, Sec. 609(e)(2), added subpar. 
(D).
    Subsec. (e). Pub. L. 105-33 substituted ``September 30, 2002.'' for 
``September 30, 1998.''
    1996--Subsec. (a)(1)(A). Pub. L. 104-208 inserted ``or the Holding 
Company of the Student Loan Marketing Association, including any 
subsidiary of the Holding Company, created pursuant to section 1087-3 of 
this title'' after ``Student Loan Marketing Association''.
    1994--Subsec. (a)(4)(D). Pub. L. 103-382 added subpar. (D).
    1993--Subsec. (a)(3). Pub. L. 103-66, Sec. 4046(a)(1), amended 
heading.
    Subsec. (a)(3)(A). Pub. L. 103-208, Sec. 2(c)(33), substituted 
``defaulted borrower who has made arrangements to repay the obligation 
on the defaulted loans satisfactory to the holders of the defaulted 
loans'' for ``delinquent or defaulted borrower who will reenter 
repayment through loan consolidation''. See Codification note above.
    Pub. L. 103-66, Sec. 4046(a)(1), amended subpar. (A) generally. 
Prior to amendment, subpar. (A) read as follows: ``For the purpose of 
this section, the term `eligible borrower' means a borrower who, at the 
time of application for a consolidation loan--
        ``(i) has an outstanding indebtedness on eligible student loans, 
    at the time of application for a consolidation loan, of not less 
    than $7,500; and
        ``(ii) is in repayment status, or in a grace period preceding 
    repayment, or is a delinquent or defaulted borrower who will reenter 
    repayment through loan consolidation.''
    Subsec. (a)(3)(B)(ii). Pub. L. 103-66, Sec. 4046(b)(2), struck out 
at end ``Nothing in this section shall be interpreted to authorize the 
Secretary to require lenders, holders, or guarantors of consolidated 
loans to receive, to maintain, or to make reports with respect to 
preexisting records relating to any eligible student loan (as defined 
under paragraph (4)) discharged by a borrower in receiving a 
consolidation loan.''
    Subsec. (a)(4)(A). Pub. L. 103-208, Sec. 2(c)(34), struck out before 
semicolon at end ``, except for loans made to parent borrowers under 
section 1078-2 of this title as in effect prior to October 17, 1986''.
    Subsec. (a)(4)(C). Pub. L. 103-208, Sec. 2(c)(35), substituted 
``part A'' for ``part C'' before ``of title VII of the Public Health 
Service Act''.
    Subsec. (b)(1)(A), (E), (F). Pub. L. 103-66, Sec. 4046(a)(2)(A), 
inserted ``with income-sensitive repayment terms'' after ``obtain a 
consolidation loan'' in subpar. (A)(ii), added subpar. (E), and 
redesignated former subpar. (E) as (F).
    Subsec. (b)(4)(C). Pub. L. 103-66, Sec. 4046(a)(2)(B), amended 
subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: 
``provides that periodic installments of principal need not be paid, but 
interest shall accrue and be paid by the Secretary, during any period 
for which the borrower would be eligible for a deferral under section 
1078(b)(1)(M) of this title, and that any such period shall not be 
included in determining the repayment period pursuant to subsection 
(c)(2) of this section;''.
    Subsec. (b)(5). Pub. L. 103-66, Sec. 4046(a)(2)(C), added par. (5).
    Subsec. (c)(1)(B), (C). Pub. L. 103-66, Sec. 4046(a)(3)(A), amended 
subpars. (B) and (C) generally. Prior to amendment, subpars. (B) and (C) 
read as follows:
    ``(B) Except as provided in subparagraph (C), a consolidation loan 
shall bear interest at an annual rate on the unpaid principal balance of 
the loan which is equal to the weighted average of the interest rates on 
the loans consolidated, rounded to the nearest whole percent.
    ``(C) A consolidation loan shall bear interest at an annual rate on 
the unpaid principal balance of the loan equal to not less than 9 
percent.''
    Subsec. (c)(2)(A). Pub. L. 103-208, Sec. 2(c)(36), inserted period 
at end of cl. (vi). See Codification note above.
    Pub. L. 103-66, Sec. 4046(a)(3)(B)(i), in introductory provisions 
substituted ``income-sensitive repayment schedules, established by the 
lender in accordance with the regulations of the Secretary. Except as 
required by such income-sensitive repayment schedules, or by the terms 
of repayment pursuant to income contingent repayment offered by the 
Secretary under subsection (b)(5) of this section, such repayment 
terms'' for ``income sensitive repayment schedules. Such repayment 
terms'', added cl. (i), and redesignated former cls. (i) to (v) as (ii) 
to (vi), respectively.
    Subsec. (c)(2)(B), (C). Pub. L. 103-66, Sec. 4046(a)(3)(B)(ii), 
(iii), redesignated subpar. (C) as (B) and struck out former subpar. (B) 
which read as follows: ``Unless a consolidation loan under subparagraph 
(A)(ii) will be used to discharge at least $5,000 of loans made under 
this part, such loan shall be repaid in accordance with subparagraph 
(A)(i).''
    Subsec. (c)(3)(A). Pub. L. 103-208, Sec. 2(c)(37), inserted ``be an 
amount'' before ``equal to''.
    Subsec. (c)(3)(B). Pub. L. 103-66, Sec. 4046(a)(3)(C), inserted 
``except as required by the terms of repayment pursuant to income 
contingent repayment offered by the Secretary under subsection (b)(5) of 
this section,'' before ``the lender''.
    Subsec. (f). Pub. L. 103-66, Sec. 4106(a), added subsec. (f).
    1992--Pub. L. 102-325, Sec. 419(a), substituted ``Federal 
consolidation'' for ``Consolidation'' in section catchline.
    Subsec. (a)(3)(A)(i). Pub. L. 102-325, Sec. 419(b)(1)(A), 
substituted ``$7,500'' for ``$5,000''.
    Subsec. (a)(3)(A)(ii). Pub. L. 102-325, Sec. 419(b)(1)(B), amended 
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ``is 
in repayment status, or in a grace period preceding repayment, and is 
not delinquent with respect to any required payment on such indebtedness 
by more than 90 days.''
    Subsec. (a)(3)(B). Pub. L. 102-325, Sec. 419(c), amended subpar. (B) 
generally. Prior to amendment, subpar. (B) read as follows: ``An 
individual's status as an eligible borrower under this section 
terminates upon receipt of a consolidation loan under this section 
except with respect to eligible student loans received after the date of 
receipt of the consolidation loan. Loans made under this section shall, 
to the extent used to discharge loans made under this subchapter and 
part C of subchapter I of chapter 34 of title 42, be counted against the 
applicable limitations on aggregate indebtedness contained in sections 
1075(a)(2), 1078(b)(1)(B), 1078-1(b)(2), and 1087dd(a)(2) of this title. 
Nothing in this subparagraph shall be interpreted to authorize the 
Secretary to require lenders, holders, or guarantors of consolidation 
loans to receive, to maintain, or to make reports with respect to pre-
existing records relating to any eligible student loan (as defined under 
subsection (a)(4) of this section) discharged by a borrower in receiving 
a consolidation loan.''
    Subsec. (a)(3)(C). Pub. L. 102-325, Sec. 419(d), added subpar. (C).
    Subsec. (a)(4)(A). Pub. L. 102-325, Sec. 419(b)(2), amended subpar. 
(A) generally. Prior to amendment, subpar. (A) read as follows: ``made, 
insured, or guaranteed under this part, except for loans made to parent 
borrowers under section 1078-2 of this title, including loans made to 
parent borrowers under section 1078-2 of this title as in effect prior 
to October 17, 1986;''.
    Subsec. (b)(4)(C). Pub. L. 102-325, Sec. 419(e), amended subpar. (C) 
generally. Prior to amendment, subpar. (C) read as follows: ``provides 
that periodic installments of principal need not be paid, but interest 
shall accrue and be paid, during any period for which the borrower would 
be eligible for a deferral under clause (i), (viii), or (ix) of section 
1078(b)(1)(M) of this title, and that any such period shall not be 
included in determining the repayment period pursuant to subsection 
(c)(2) of this section;''.
    Subsec. (c)(2)(A). Pub. L. 102-325, Sec. 419(f), substituted ``which 
shall include'' for ``which may include'' in first sentence, inserted 
second sentence, and struck out former second sentence which read as 
follows: ``Such repayment terms shall require that if the sum of the 
consolidation loan and the amount outstanding on other student loans to 
the individual--
        ``(i) is equal to or greater than $5,000 but less than $7,500, 
    then such consolidation loan shall be repaid in not more than 10 
    years;
        ``(ii) is equal to or greater than $7,500 but less than $10,000, 
    then such consolidation loan shall be repaid in not more than 12 
    years;
        ``(iii) is equal to or greater than $10,000 but less than 
    $20,000, then such consolidation loan shall be repaid in not more 
    than 15 years;
        ``(iv) is equal to or greater than $20,000 but less than 
    $45,000, then such consolidation loan shall be repaid in not more 
    than 20 years; or
        ``(v) is equal to or greater than $45,000, then such 
    consolidation loan shall be repaid in not more than 25 years.''
    Subsec. (d). Pub. L. 102-408, Sec. 306(a), added subsec. (d). Former 
subsec. (d) redesignated (e).
    Pub. L. 102-325, Sec. 419(g), substituted ``September 30, 1998'' for 
``September 30, 1992''.
    Subsec. (e). Pub. L. 102-408, Sec. 306(b), which directed the 
substitution of ``1997'' for ``1992'', could not be executed because 
``1992'' did not appear in text subsequent to the amendment by Pub. L. 
102-325, Sec. 419(g). See above.
    Pub. L. 102-408, Sec. 306(a)(1), redesignated subsec. (d) as subsec. 
(e).
    1987--Subsec. (a)(1)(C). Pub. L. 100-50, Sec. 10(s)(1), which 
directed the amendment of subpar. (C) by substituting ``(C), (E), and 
(J)'' for ``(C) and (E)'', was executed by substituting the new language 
for ``(C), and (E)'', as the probable intent of Congress.
    Subsec. (a)(3)(A). Pub. L. 100-50, Sec. 10(s)(2), struck out cl. 
(iii) which read as follows: ``is not a parent borrower under section 
1078-2 of this title.''
    Subsec. (a)(3)(B). Pub. L. 100-50, Sec. 10(s)(3), substituted 
``eligible student loans received'' for ``loans received under this 
subchapter and part C of subchapter I of chapter 34 of title 42'', 
``under this subchapter and part C of subchapter I of chapter 34 of 
title 42'' for ``under this part'', and ``, 1078(b)(1)(B), 1078-1(b)(2), 
and 1087dd(a)(2) of this title'' for ``and 1078(b)(1)(B) of this 
title'', and inserted provision that nothing in subpar. (B) should be 
interpreted to authorize Secretary to require lenders, holders, or 
guarantors of consolidation loans to make reports with respect to pre-
existing records relating to eligible student loans discharged by a 
borrower in receiving a consolidation loan.
    Subsec. (a)(4)(A). Pub. L. 100-50, Sec. 10(s)(4), inserted exception 
for loans made to parent borrowers under section 1078-2 of this title.
    Subsec. (b)(1)(C). Pub. L. 100-50, Sec. 10(s)(5), in cl. (i), 
substituted ``subsection (a)(3) of this section'' for ``subsection 
(a)(2) of this section'' and, in cl. (ii), substituted ``all eligible 
student loans received by the eligible borrower'' for ``all loans 
received by the eligible borrower under this subchapter and part C of 
subchapter I of chapter 34 of title 42''.
    Subsec. (c)(2)(A)(v). Pub. L. 100-50, Sec. 10(s)(6), substituted 
``equal to or greater'' for ``more'' the first time appearing, as the 
probable intent of Congress.
    Subsec. (c)(5). Pub. L. 100-50, Sec. 10(s)(7), inserted ``, but a 
fee may be payable by the lender to the guaranty agency to cover the 
costs of increased or extended liability with respect to such loan'' 
before period at end.


                    Effective Date of 1998 Amendment

    Amendment by section 416(b)(2) of Pub. L. 105-244 applicable with 
respect to any loan made, insured, or guaranteed under this part for 
which the first disbursement is made on or after Oct. 1, 1998, and 
before July 1, 2003, except that such amendment is applicable with 
respect to any loan made under this section for which application is 
received by an eligible lender on or after Oct. 1, 1998, and before July 
1, 2003, see section 416(c) of Pub. L. 105-244, set out as a note under 
section 1077a of this title.
    Amendment by section 420 of Pub. L. 105-244 effective Oct. 1, 1998, 
except as otherwise provided in Pub. L. 105-244, see section 3 of Pub. 
L. 105-244, set out as a note under section 1001 of this title.


                    Effective Date of 1996 Amendment

    Section 101(e) [title VI, Sec. 602(b)(1)(B)] of div. A of Pub. L. 
104-208 provided that: ``The amendments made by this paragraph [amending 
this section and section 1085 of this title] shall take effect on the 
reorganization effective date as defined in section 440(h) of the Higher 
Education Act of 1965 [20 U.S.C. 1087-3(h)] (as added by subsection 
(a)).''


                    Effective Date of 1993 Amendments

    Amendment by Pub. L. 103-208 effective as if included in the Higher 
Education Amendments of 1992, Pub. L. 102-325, except as otherwise 
provided, see section 5(a) of Pub. L. 103-208, set out as a note under 
section 1051 of this title.
    Section 4046(c) of Pub. L. 103-66 provided that: ``The amendments 
made by this section [amending this section and section 1085 of this 
title] shall take effect on July 1, 1994, except that the amendments 
made by subsection (a)(2)(B) [amending this section] shall take effect 
upon enactment [Aug. 10, 1993].''


                    Effective Date of 1992 Amendments

    Section 306(c) of Pub. L. 102-408 provided that: ``The amendments 
made by this section [amending this section] take effect 60 days after 
the date of enactment of this Act [Oct. 13, 1992].''
    Amendment by Pub. L. 102-325 effective July 23, 1992, except that 
changes made in this section, relating to consolidation loans, 
applicable with respect to loans for which the application is received 
by an eligible lender on or after Jan. 1, 1993, see section 432, set out 
as a note under section 1078 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.


                           Pending Applicants

    Section 609(f) of Pub. L. 105-78 provided that: ``The consolidation 
loans authorized by the amendments made by this section [amending this 
section] shall be available notwithstanding any pending application by a 
student for a consolidation loan under part D of title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1087a et seq.), upon withdrawal of such 
application by the student at any time prior to receipt of such a 
consolidation loan.''


                         Cost Evaluation Report

    Pub. L. 99-272, title XVI, Sec. 16017(d), Apr. 7, 1986, 100 Stat. 
348, provided that: ``The Secretary of Education shall evaluate the 
cost, efficiency, and impact of the consolidation loan program 
established by the amendments made by this section [enacting former 
section 1078-3 of this title and amending former sections 1077, 1085, 
1087-1, and 1087-2 of this title] and shall report to the Congress not 
later than June 30, 1988, on the findings and recommendations required 
by this subsection.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1077, 1077a, 1078, 1078-7, 
1078-10, 1078-11, 1082, 1083, 1085, 1087, 1087-1, 1087-2, 1087e, 1091, 
1092a of this title; title 42 section 292e.
