 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
                      Part D--Federal Perkins Loans
 
Sec. 1087bb. Allocation of funds


(a) Allocation based on previous allocation

    (1) From the amount appropriated pursuant to section 1087aa(b) of 
this title for each fiscal year, the Secretary shall first allocate to 
each eligible institution an amount equal to--
        (A) 100 percent of the amount received under subsections (a) and 
    (b) of this section for fiscal year 1999 (as such subsections were 
    in effect with respect to allocations for such fiscal year), 
    multiplied by
        (B) the institution's default penalty, as determined under 
    subsection (e) of this section,

except that if the institution has a cohort default rate in excess of 
the applicable maximum cohort default rate under subsection (f) of this 
section, the institution may not receive an allocation under this 
paragraph.
    (2)(A) From the amount so appropriated, the Secretary shall next 
allocate to each eligible institution that began participation in the 
program under this part after fiscal year 1999 but is not a first or 
second time participant, an amount equal to the greater of--
        (i) $5,000; or
        (ii) 100 percent of the amount received and expended under this 
    part for the first year it participated in the program.

    (B) From the amount so appropriated, the Secretary shall next 
allocate to each eligible institution that began participation in the 
program under this part after fiscal year 1999 and is a first or second 
time participant, an amount equal to the greatest of--
        (i) $5,000;
        (ii) an amount equal to (I) 90 percent of the amount received 
    and used under this part in the second preceding fiscal year by 
    eligible institutions offering comparable programs of instruction, 
    divided by (II) the number of students enrolled at such comparable 
    institutions in such fiscal year, multiplied by (III) the number of 
    students enrolled at the applicant institution in such fiscal year; 
    or
        (iii) 90 percent of the institution's allocation under this part 
    for the preceding fiscal year.

    (C) Notwithstanding subparagraphs (A) and (B) of this paragraph, the 
Secretary shall allocate to each eligible institution which--
        (i) was a first-time participant in the program in fiscal year 
    2000 or any subsequent fiscal year, and
        (ii) received a larger amount under this subsection in the 
    second year of participation,

an amount equal to 90 percent of the amount it received under this 
subsection in its second year of participation.
    (D) For any fiscal year after a fiscal year in which an institution 
receives an allocation under subparagraph (A), (B), or (C), the 
Secretary shall allocate to such institution an amount equal to the 
product of--
        (i) the amount determined under subparagraph (A), (B), or (C), 
    multiplied by
        (ii) the institution's default penalty, as determined under 
    subsection (e) of this section,

except that if the institution has a cohort default rate in excess of 
the applicable maximum cohort default rate under subsection (f) of this 
section, the institution may not receive an allocation under this 
paragraph.
    (3)(A) If the amount appropriated for any fiscal year is less than 
the amount required to be allocated to all institutions under paragraph 
(1) of this subsection, then the amount of the allocation to each such 
institution shall be ratably reduced.
    (B) If the amount appropriated for any fiscal year is more than the 
amount required to be allocated to all institutions under paragraph (1) 
but less than the amount required to be allocated to all institutions 
under paragraph (2), then--
        (i) the Secretary shall allot the amount required to be 
    allocated to all institutions under paragraph (1), and
        (ii) the amount of the allocation to each institution under 
    paragraph (2) shall be ratably reduced.

    (C) If additional amounts are appropriated for any such fiscal year, 
such reduced amounts shall be increased on the same basis as they were 
reduced (until the amount allocated equals the amount required to be 
allocated under paragraphs (1) and (2) of this subsection).

(b) Allocation of excess based on share of excess eligible amounts

    (1) From the remainder of the amount appropriated pursuant to 
section 1087aa(b) of this title after making the allocations required by 
subsection (a) of this section, the Secretary shall allocate to each 
eligible institution which has an excess eligible amount an amount which 
bears the same ratio to such remainder as such excess eligible amount 
bears to the sum of the excess eligible amounts of all such eligible 
institutions (having such excess eligible amounts).
    (2) For any eligible institution, the excess eligible amount is the 
amount, if any, by which--
        (A)(i) that institution's eligible amount (as determined under 
    paragraph (3)), divided by (ii) the sum of the eligible amounts of 
    all institutions (as so determined), multiplied by (iii) the amount 
    appropriated pursuant to section 1087aa(b) of this title for the 
    fiscal year; exceeds
        (B) the amount required to be allocated to that institution 
    under subsection (a) of this section,

except that an eligible institution which has a cohort default rate in 
excess of the applicable maximum cohort default rate under subsection 
(f) of this section may not receive an allocation under this paragraph.
    (3) For any eligible institution, the eligible amount of that 
institution is equal to--
        (A) the amount of the institution's self-help need, as 
    determined under subsection (c) of this section; minus
        (B) the institution's anticipated collections; multiplied by
        (C) the institution's default penalty, as determined under 
    subsection (e) of this section;

except that, if the institution has a cohort default rate in excess of 
the applicable maximum cohort default rate under subsection (f) of this 
section, the eligible amount of that institution is zero.

(c) Determination of institution's self-help need

    (1) The amount of an institution's self-help need is equal to the 
sum of the self-help need of the institution's eligible undergraduate 
students and the self-help need of the institution's eligible graduate 
and professional students.
    (2) To determine the self-help need of an institution's eligible 
undergraduate students, the Secretary shall--
        (A) establish various income categories for dependent and 
    independent undergraduate students;
        (B) establish an expected family contribution for each income 
    category of dependent and independent undergraduate students, 
    determined on the basis of the average expected family contribution 
    (computed in accordance with part E of this subchapter) of a 
    representative sample within each income category for the second 
    preceding fiscal year;
        (C) compute 25 percent of the average cost of attendance for all 
    undergraduate students;
        (D) multiply the number of eligible dependent students in each 
    income category by the lesser of--
            (i) 25 percent of the average cost of attendance for all 
        undergraduate students determined under subparagraph (C); or
            (ii) the average cost of attendance for all undergraduate 
        students minus the expected family contribution determined under 
        subparagraph (B) for that income category, except that the 
        amount computed by such subtraction shall not be less than zero;

        (E) add the amounts determined under subparagraph (D) for each 
    income category of dependent students;
        (F) multiply the number of eligible independent students in each 
    income category by the lesser of--
            (i) 25 percent of the average cost of attendance for all 
        undergraduate students determined under subparagraph (C); or
            (ii) the average cost of attendance for all undergraduate 
        students minus the expected family contribution determined under 
        subparagraph (B) for that income category, except that the 
        amount computed by such subtraction for any income category 
        shall not be less than zero;

        (G) add the amounts determined under subparagraph (F) for each 
    income category of independent students; and
        (H) add the amounts determined under subparagraphs (E) and (G).

    (3) To determine the self-help need of an institution's eligible 
graduate and professional students, the Secretary shall--
        (A) establish various income categories for graduate and 
    professional students;
        (B) establish an expected family contribution for each income 
    category of graduate and professional students, determined on the 
    basis of the average expected family contribution (computed in 
    accordance with part E of this subchapter) of a representative 
    sample within each income category for the second preceding fiscal 
    year;
        (C) determine the average cost of attendance for all graduate 
    and professional students;
        (D) subtract from the average cost of attendance for all 
    graduate and professional students (determined under subparagraph 
    (C)), the expected family contribution (determined under 
    subparagraph (B)) for each income category, except that the amount 
    computed by such subtraction for any income category shall not be 
    less than zero;
        (E) multiply the amounts determined under subparagraph (D) by 
    the number of eligible students in each category;
        (F) add the amounts determined under subparagraph (E) for each 
    income category.

    (4)(A) For purposes of paragraphs (2) and (3), the term ``average 
cost of attendance'' means the average of the attendance costs for 
undergraduate students and for graduate and professional students, which 
shall include (i) tuition and fees determined in accordance with 
subparagraph (B), (ii) standard living expenses determined in accordance 
with subparagraph (C), and (iii) books and supplies determined in 
accordance with subparagraph (D).
    (B) The average undergraduate and graduate and professional tuition 
and fees described in subparagraph (A)(i) shall be computed on the basis 
of information reported by the institution to the Secretary, which shall 
include (i) total revenue received by the institution from undergraduate 
and graduate tuition and fees for the second year preceding the year for 
which it is applying for an allocation, and (ii) the institution's 
enrollment for such second preceding year.
    (C) The standard living expense described in subparagraph (A)(ii) is 
equal to 150 percent of the difference between the income protection 
allowance for a family of five with one in college and the income 
protection allowance for a family of six with one in college for a 
single independent student.
    (D) The allowance for books and supplies described in subparagraph 
(A)(iii) is equal to $450.

(d) Anticipated collections

    (1) An institution's anticipated collections are equal to the amount 
which was collected during the second year preceding the beginning of 
the award period, multiplied by 1.21.
    (2) The Secretary shall establish an appeals process by which the 
anticipated collections required in paragraph (1) may be waived for 
institutions with low cohort default rates in the program assisted under 
this part.

(e) Default penalties

                (1) Years preceding fiscal year 2000

        For any fiscal year preceding fiscal year 2000, any institution 
    with a cohort default rate that--
            (A) equals or exceeds 15 percent, shall establish a default 
        reduction plan pursuant to regulations prescribed by the 
        Secretary, except that such plan shall not be required with 
        respect to an institution that has a default rate of less than 
        20 percent and that has less than 100 students who have loans 
        under this part in such academic year;
            (B) equals or exceeds 20 percent, but is less than 25 
        percent, shall have a default penalty of 0.9;
            (C) equals or exceeds 25 percent, but is less than 30 
        percent, shall have a default penalty of 0.7; and
            (D) equals or exceeds 30 percent shall have a default 
        penalty of zero.

                (2) Years following fiscal year 2000

        For fiscal year 2000 and any succeeding fiscal year, any 
    institution with a cohort default rate (as defined under subsection 
    (g) of this section) that equals or exceeds 25 percent shall have a 
    default penalty of zero.

                          (3) Ineligibility

        (A) In general

            For fiscal year 2000 and any succeeding fiscal year, any 
        institution with a cohort default rate (as defined in subsection 
        (g) of this section) that equals or exceeds 50 percent for each 
        of the 3 most recent years for which data are available shall 
        not be eligible to participate in a program under this part for 
        the fiscal year for which the determination is made and the 2 
        succeeding fiscal years, unless, within 30 days of receiving 
        notification from the Secretary of the loss of eligibility under 
        this paragraph, the institution appeals the loss of eligibility 
        to the Secretary. The Secretary shall issue a decision on any 
        such appeal within 45 days after the submission of the appeal. 
        Such decision may permit the institution to continue to 
        participate in a program under this part if--
                (i) the institution demonstrates to the satisfaction of 
            the Secretary that the calculation of the institution's 
            cohort default rate is not accurate, and that recalculation 
            would reduce the institution's cohort default rate for any 
            of the 3 fiscal years below 50 percent; or
                (ii) there are, in the judgment of the Secretary, such a 
            small number of borrowers entering repayment that the 
            application of this subparagraph would be inequitable.

        (B) Continued participation

            During an appeal under subparagraph (A), the Secretary may 
        permit the institution to continue to participate in a program 
        under this part.

        (C) Return of funds

            Within 90 days after the date of any termination pursuant to 
        subparagraph (A), or the conclusion of any appeal pursuant to 
        subparagraph (B), whichever is later, the balance of the student 
        loan fund established under this part by the institution that is 
        the subject of the termination shall be distributed as follows:
                (i) The Secretary shall first be paid an amount which 
            bears the same ratio to such balance (as of the date of such 
            distribution) as the total amount of Federal capital 
            contributions to such fund by the Secretary under this part 
            bears to the sum of such Federal capital contributions and 
            the capital contributions to such fund made by the 
            institution.
                (ii) The remainder of such student loan fund shall be 
            paid to the institution.

        (D) Use of returned funds

            Any funds returned to the Secretary under this paragraph 
        shall be reallocated to institutions of higher education 
        pursuant to subsection (i) of this section.

        (E) Definition

            For the purposes of subparagraph (A), the term ``loss of 
        eligibility'' shall be defined as the mandatory liquidation of 
        an institution's student loan fund, and assignment of the 
        institution's outstanding loan portfolio to the Secretary.

(f) Applicable maximum cohort default rate

                    (1) Award years prior to 2000

        For award years prior to award year 2000, the applicable maximum 
    cohort default rate is 30 percent.

           (2) Award year 2000 and succeeding award years

        For award year 2000 and subsequent years, the applicable maximum 
    cohort default rate is 25 percent.

(g) ``Cohort default rate'' defined

    (1)(A) The term ``cohort default rate'' means, for any award year in 
which 30 or more current and former students at the institution enter 
repayment on loans under this part (received for attendance at the 
institution), the percentage of those current and former students who 
enter repayment on such loans (received for attendance at that 
institution) in that award year who default before the end of the 
following award year.
    (B) For any award year in which less than 30 of the institution's 
current and former students enter repayment, the term ``cohort default 
rate'' means the percentage of such current and former students who 
entered repayment on such loans in any of the three most recent award 
years and who default before the end of the award year immediately 
following the year in which they entered repayment.
    (C) A loan on which a payment is made by the institution of higher 
education, its owner, agency, contractor, employee, or any other entity 
or individual affiliated with such institution, in order to avoid 
default by the borrower, is considered as in default for the purposes of 
this subsection.
    (D) In the case of a student who has attended and borrowed at more 
than one school, the student (and his or her subsequent repayment or 
default) is attributed to the school for attendance at which the student 
received the loan that entered repayment in the award year.
    (E) In determining the number of students who default before the end 
of such award year, the institution, in calculating the cohort default 
rate, shall exclude--
        (i) any loan on which the borrower has, after the time periods 
    specified in paragraph (2)--
            (I) voluntarily made 6 consecutive payments;
            (II) voluntarily made all payments currently due;
            (III) repaid in full the amount due on the loan; or
            (IV) received a deferment or forbearance, based on a 
        condition that began prior to such time periods;

        (ii) any loan which has, after the time periods specified in 
    paragraph (2), been rehabilitated or canceled; and
        (iii) any other loan that the Secretary determines should be 
    excluded from such determination.

    (F) The Secretary shall prescribe regulations designed to prevent an 
institution from evading the application to that institution of a cohort 
default rate determination under this subsection through the use of such 
measures as branching, consolidation, change of ownership or control or 
other means as determined by the Secretary.
    (2) For purposes of calculating the cohort default rate under this 
subsection, a loan shall be considered to be in default--
        (A) 240 days (in the case of a loan repayable monthly), or
        (B) 270 days (in the case of a loan repayable quarterly),

after the borrower fails to make an installment payment when due or to 
comply with other terms of the promissory note.

(h) Filing deadlines

    The Secretary shall, from time to time, set dates before which 
institutions must file applications for allocations under this part.

(i) Reallocation of excess allocations

                           (1) In general

        (A) If an institution of higher education returns to the 
    Secretary any portion of the sums allocated to such institution 
    under this section for any fiscal year, the Secretary shall 
    reallocate 80 percent of such returned portions to participating 
    institutions in an amount not to exceed such participating 
    institution's excess eligible amounts as determined under paragraph 
    (2).
        (B) For the purpose of this subsection, the term ``participating 
    institution'' means an institution of higher education that--
            (i) was a participant in the program assisted under this 
        part in fiscal year 1999; and
            (ii) did not receive an allocation under subsection (a) of 
        this section in the fiscal year for which the reallocation 
        determination is made.

                     (2) Excess eligible amount

        For any participating institution, the excess eligible amount is 
    the amount, if any, by which--
            (A)(i) that institution's eligible amount (as determined 
        under subsection (b)(3) of this section), divided by (ii) the 
        sum of the eligible amounts of all participating institutions 
        (as determined under paragraph (3)), multiplied by (iii) the 
        amount of funds available for reallocation under this 
        subsection; exceeds
            (B) the amount required to be allocated to that institution 
        under subsection (b) of this section.

                            (3) Remainder

        The Secretary shall reallocate the remainder of such returned 
    portions in accordance with regulations of the Secretary.

                      (4) Allocation reductions

        If under paragraph (1) of this subsection an institution returns 
    more than 10 percent of its allocation, the institution's allocation 
    for the next fiscal year shall be reduced by the amount returned. 
    The Secretary may waive this paragraph for a specific institution if 
    the Secretary finds that enforcing it is contrary to the interest of 
    the program.

(Pub. L. 89-329, title IV, Sec. 462, as added Pub. L. 99-498, title IV, 
Sec. 405(a), Oct. 17, 1986, 100 Stat. 1440; amended Pub. L. 100-50, 
Sec. 13(a)-(d), June 3, 1987, 101 Stat. 348; Pub. L. 102-325, title IV, 
Sec. 462, July 23, 1992, 106 Stat. 576; Pub. L. 103-208, Sec. 2(f)(1)-
(4), Dec. 20, 1993, 107 Stat. 2470, 2471; Pub. L. 105-244, title IV, 
Sec. 462(a)(1), (2), (b)-(e), Oct. 7, 1998, 112 Stat. 1720-1723.)


                            Prior Provisions

    A prior section 1087bb, Pub. L. 89-329, title IV, Sec. 462, as added 
Pub. L. 92-318, title I, Sec. 137(b), June 23, 1972, 86 Stat. 273; 
amended Pub. L. 96-374, title IV, Sec. 448(a), title XIII, 
Sec. 1391(a)(1), Oct. 3, 1980, 94 Stat. 1443, 1503, provided for 
apportionment of appropriations among States, prior to the general 
revision of this part by Pub. L. 99-498.


                               Amendments

    1998--Subsec. (a)(1). Pub. L. 105-244, Sec. 462(e)(1), inserted 
``cohort'' before ``default'' in two places in concluding provisions.
    Pub. L. 105-244, Sec. 462(a)(2)(A)(ii), substituted ``subsection 
(f)'' for ``subsection (g)'' in concluding provisions.
    Subsec. (a)(1)(A). Pub. L. 105-244, Sec. 462(a)(1)(A), which 
directed the substitution of ``the amount received under subsections (a) 
and (b) of this section for fiscal year 1999 (as such subsections were 
in effect with respect to allocations for such fiscal year)'' for ``the 
amount of the Federal capital contribution allocated to such institution 
under this part for fiscal year 1985,'' was executed by making the 
substitution for text which read ``amount of Federal capital'' rather 
than ``amount of the Federal capital'', to reflect the probable intent 
of Congress.
    Subsec. (a)(1)(B). Pub. L. 105-244, Sec. 462(a)(2)(A)(i), 
substituted ``subsection (e)'' for ``subsection (f)''.
    Subsec. (a)(2)(A), (B). Pub. L. 105-244, Sec. 462(a)(1)(B)(i), 
substituted ``1999'' for ``1985'' in introductory provisions.
    Subsec. (a)(2)(C)(i). Pub. L. 105-244, Sec. 462(a)(1)(B)(ii), 
substituted ``2000'' for ``1986''.
    Subsec. (a)(2)(D). Pub. L. 105-244, Sec. 462(e)(1), inserted 
``cohort'' before ``default'' in two places in concluding provisions.
    Pub. L. 105-244, Sec. 462(a)(2)(A)(iv), substituted ``subsection 
(f)'' for ``subsection (g)'' in concluding provisions.
    Subsec. (a)(2)(D)(ii). Pub. L. 105-244, Sec. 462(a)(2)(A)(iii), 
substituted ``subsection (e)'' for ``subsection (f)''.
    Subsec. (b). Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated 
subsec. (c) as (b).
    Pub. L. 105-244, Sec. 462(a)(2)(B), struck out heading and text of 
subsec. (b). Text read as follows: ``From one-quarter of the remainder 
of the amount appropriated pursuant to section 1087aa(b) of this title 
for any fiscal year (after making the allocations required by subsection 
(a) of this section), the Secretary shall allocate to each eligible 
institution an amount which bears the same ratio to such one-quarter 
as--
        ``(1) the amount the eligible institution receives for such 
    fiscal year under subsection (a) of this section, bears to
        ``(2) the amount all such institutions receive under such 
    subsection (a) of this section.''
    Subsec. (b)(2). Pub. L. 105-244, Sec. 462(e)(2), inserted ``cohort'' 
before ``default'' in two places in concluding provisions.
    Subsec. (b)(3). Pub. L. 105-244, Sec. 462(e)(2), inserted ``cohort'' 
before ``default'' in two places in concluding provisions.
    Subsec. (c). Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated 
subsec. (d) as (c). Former subsec. (c) redesignated (b).
    Subsec. (c)(1). Pub. L. 105-244, Sec. 462(a)(2)(C), substituted 
``the remainder'' for ``three-quarters of the remainder''.
    Subsec. (c)(2). Pub. L. 105-244, Sec. 462(a)(2)(D), substituted 
``subsection (f)'' for ``subsection (g)'' in concluding provisions.
    Subsec. (c)(3). Pub. L. 105-244, Sec. 462(b), in introductory 
provisions, struck out ``the Secretary, for academic year 1988-1989, 
shall use the procedures employed for academic year 1986-1987, and, for 
any subsequent academic years,'' after ``professional students,''.
    Pub. L. 105-244, Sec. 462(a)(2)(E)(iii), substituted ``subsection 
(f)'' for ``subsection (g)'' in concluding provisions.
    Subsec. (c)(3)(A). Pub. L. 105-244, Sec. 462(a)(2)(E)(i), 
substituted ``subsection (c)'' for ``subsection (d)''.
    Subsec. (c)(3)(C). Pub. L. 105-244, Sec. 462(a)(2)(E)(ii), 
substituted ``subsection (e)'' for ``subsection (f)''.
    Subsec. (d). Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated 
subsec. (e) as (d). Former subsec. (d) redesignated (c).
    Subsec. (d)(2). Pub. L. 105-244, Sec. 462(e)(3), inserted ``cohort'' 
before ``default''.
    Subsec. (e). Pub. L. 105-244, Sec. 462(c), amended heading and text 
of subsec. (e) generally. Prior to amendment, text read as follows:
    ``(1) For any fiscal year prior to fiscal year 1994, any institution 
which has a default rate which equals or exceeds 7.5 percent but does 
not exceed the maximum default rate applicable to the award year under 
subsection (g) of this section, the institution's default penalty is a 
percentage equal to the complement of such default rate. For any 
institution which has a default rate that does not exceed 7.5 percent, 
the institution's default penalty is equal to one.
    ``(2) For fiscal year 1994 and any succeeding fiscal year, any 
institution with a cohort default rate (as defined under subsection (h) 
of this section) which--
        ``(A) equals or exceeds 15 percent, shall establish a default 
    reduction plan pursuant to regulations issued by the Secretary;
        ``(B) equals or exceeds 20 percent, but is less than 25 percent, 
    shall have a default penalty of 0.9;
        ``(C) equals or exceeds 25 percent, but is less than 30 percent, 
    shall have a default penalty of 0.7; and
        ``(D) equals or exceeds 30 percent shall have a default penalty 
    of zero.''
    Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated subsec. (f) as (e). 
Former subsec. (e) redesignated (d).
    Subsec. (f). Pub. L. 105-244, Sec. 462(c), amended heading and text 
of subsec. (f) generally. Prior to amendment, text read as follows:
    ``(1) For award years 1992 and 1993, the applicable maximum default 
rate is 15 percent.
    ``(2) For award year 1994 and subsequent years, the maximum cohort 
default rate is 30 percent.''
    Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated subsec. (g) as (f). 
Former subsec. (f) redesignated (e).
    Subsec. (g). Pub. L. 105-244, Sec. 462(d)(1), inserted heading and 
struck out former heading.
    Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated subsec. (h) as (g). 
Former subsec. (g) redesignated (f).
    Subsec. (g)(1). Pub. L. 105-244, Sec. 462(d)(1), (2), redesignated 
par. (3) as (1), substituted ``The term'' for ``For award year 1994 and 
any succeeding award year, the term'' in subpar. (A), and struck out 
former par. (1) which read as follows: ``For any award year prior to 
award year 1994, for the purpose of this section, the default rate is 
computed by dividing--
        ``(A) the total principal amount of defaulted loans; by
        ``(B) the total principal amount of loans made under this part, 
    less the principal amount of all loans made to borrowers who are 
    eligible for deferment under section 1087dd(c)(2)(A)(i) of this 
    title or are in a grace period preceding repayment.''
    Subsec. (g)(1)(B). Pub. L. 105-244, Sec. 462(d)(3)(A), (B), 
redesignated subpar. (C) as (B) and struck out former subpar. (B) which 
read as follows: ``In determining the number of students who default 
before the end of such award year, the Secretary shall, in calculating 
the cohort default rate, exclude any loans which, due to improper 
servicing or collection, would result in an inaccurate or incomplete 
calculation of the cohort default rate.''
    Subsec. (g)(1)(C), (D). Pub. L. 105-244, Sec. 462(d)(3)(B), 
redesignated subpars. (D) and (F) as (C) and (D), respectively. Former 
subpar. (C) redesignated (B).
    Subsec. (g)(1)(E). Pub. L. 105-244, Sec. 462(d)(3)(A), (C), added 
subpar. (E) and struck out former subpar. (E) which read as follows: 
``Any loan that is in default but on which the borrower has made 
satisfactory arrangements to resume payment or any loan which has been 
rehabilitated before the end of such following award year is not 
considered as in default for purposes of this subsection.''
    Subsec. (g)(1)(F). Pub. L. 105-244, Sec. 462(d)(3)(B), (e)(4), 
redesignated subpar. (G) as (F) and inserted ``cohort'' before 
``default''. Former subpar. (F) redesignated (D).
    Subsec. (g)(1)(G). Pub. L. 105-244, Sec. 462(d)(3)(B), redesignated 
subpar. (G) as (F).
    Subsec. (g)(2). Pub. L. 105-244, Sec. 462(d)(4), added par. (2).
    Pub. L. 105-244, Sec. 462(d)(1), struck out par. (2) which read as 
follows: ``For the purpose of paragraph (1)(A), the total principal 
amount of defaulted loans is equal to the total amount borrowed under 
loans that have reached repayment status and that are in default, 
minus--
        ``(A) amounts that have been repaid or cancelled on such loans;
        ``(B) loans discharged in bankruptcy;
        ``(C) loans referred or assigned to the Secretary for collection 
    under paragraph (5)(A), (5)(B)(i), or (6) of section 1087cc(a) of 
    this title; and
        ``(D) loans that are in default but on which the borrowers have 
    made satisfactory arrangements to resume payment.''
    Subsec. (g)(3). Pub. L. 105-244, Sec. 462(d)(2), redesignated par. 
(3) as (1).
    Subsec. (g)(4). Pub. L. 105-244, Sec. 462(d)(4), struck out par. (4) 
which read as follows: ``A loan shall be considered to be in default--
        ``(A) 240 days (in the case of a loan repayable monthly), or
        ``(B) 270 days (in the case of a loan repayable quarterly), 
    after the borrower fails to make an installment payment when due or 
    to comply with other terms of the promissory note,
after the borrower fails to make an installment payment when due or to 
comply with other terms of the promissory note.''
    Subsecs. (h), (i). Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated 
subsecs. (i) and (j) as (h) and (i), respectively. Former subsec. (h) 
redesignated (g).
    Subsec. (j). Pub. L. 105-244, Sec. 462(a)(2)(H), redesignated 
subsec. (j) as (i).
    Subsec. (j)(1)(B)(i). Pub. L. 105-244, Sec. 462(a)(2)(F), 
substituted ``1999'' for ``1985''.
    Subsec. (j)(2)(A)(i). Pub. L. 105-244, Sec. 462(a)(2)(G)(i), 
substituted ``subsection (b)(3)'' for ``paragraph (3) of subsection 
(c)''.
    Subsec. (j)(2)(B). Pub. L. 105-244, Sec. 462(a)(2)(G)(ii), 
substituted ``subsection (b)'' for ``subsection (c)''.
    1993--Subsec. (a)(1), (2)(D). Pub. L. 103-208, Sec. 2(f)(1), 
substituted ``if the institution has'' for ``if the institution which 
has'' in closing provisions.
    Subsec. (d)(4)(C). Pub. L. 103-208, Sec. 2(f)(2), substituted ``150 
percent of the difference between the income protection allowance for a 
family of five with one in college and the income protection allowance 
for a family of six with one in college'' for ``three-fourths in the 
Pell Grant family size offset''.
    Subsecs. (e)(2), (h)(4)(B). Pub. L. 103-208, Sec. 2(f)(3), (4), 
realigned margins.
    1992--Subsec. (a)(1)(A). Pub. L. 102-325, Sec. 462(a), substituted 
``allocated to such institution'' for ``such institution received''.
    Subsec. (e). Pub. L. 102-325, Sec. 462(b), designated existing 
provisions as par. (1) and added par. (2).
    Subsec. (f). Pub. L. 102-325, Sec. 462(c), substituted ``default 
reduction and default penalties'' for ``Default penalty'' in heading and 
amended text generally. Prior to amendment, text read as follows: ``For 
any institution which has a default rate which equals or exceeds 7.5 
percent but does not exceed the maximum default rate applicable to the 
award year under subsection (g) of this section, the institution's 
default penalty is a percentage equal to the complement of such default 
rate. For any institution which has a default rate that does not exceed 
7.5 percent, the institution's default penalty is equal to one.''
    Subsec. (g). Pub. L. 102-325, Sec. 462(d), amended subsec. (g) 
generally. Prior to amendment, subsec. (g) read as follows:
    ``(1) For award years 1988, 1989, and 1990, the applicable maximum 
default rate is 20 percent.
    ``(2) For award year 1991 and subsequent years, the applicable 
maximum default rate is 15 percent.''
    Subsec. (h). Pub. L. 102-325, Sec. 462(e), substituted ``Definitions 
of default rate and cohort default rate'' for ``Definition of default 
rate'' in heading, in par. (1) substituted ``For any award year prior to 
award year 1994, for the purpose'' for ``For the purpose'', added par. 
(3), redesignated former par. (3) as (4), substituted ``240'' for 
``120'' in par. (4)(A), and amended par. (4)(B) generally. Prior to 
amendment, par. (4)(B) read as follows: ``180 days (in the case of a 
loan repayable quarterly),''.
    Subsec. (j). Pub. L. 102-325, Sec. 462(f), amended subsec. (j) 
generally. Prior to amendment, subsec. (j) read as follows: ``If an 
institution returns to the Secretary any portion of the sums allocated 
to such institution under this section for any fiscal year the Secretary 
shall, in accordance with regulations, reallocate such excess to other 
institutions.''
    1987--Subsec. (a)(1)(A). Pub. L. 100-50, Sec. 13(a), amended subpar. 
(A) generally, substituting ``of Federal capital contribution such 
institution received'' for ``such institution expended''.
    Subsec. (d)(3), (4). Pub. L. 100-50, Sec. 13(b), redesignated par. 
(3), defining ``average cost of attendance'' and calculating average 
undergraduate and graduate and professional tuition and fees, standard 
living expenses, and allowance for books and supplies, as (4).
    Subsec. (e). Pub. L. 100-50, Sec. 13(c), struck out ``; cash on 
hand'' after ``collections'' in heading.
    Subsec. (f). Pub. L. 100-50, Sec. 13(d), substituted ``subsection 
(g) of this section'' for ``paragraph (2)''.


                    Effective Date of 1998 Amendment

    Pub. L. 105-244, title IV, Sec. 462(a)(3), Oct. 7, 1998, 112 Stat. 
1721, provided that: ``The amendments made by this subsection [amending 
this section] shall apply with respect to allocations of amounts 
appropriated pursuant to section 461(b) [20 U.S.C. 1087aa(b)] for fiscal 
year 2000 or any succeeding fiscal year.''
    Amendment by section 462(b)-(e) 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 1993 Amendment

    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.


                    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.


                             Effective Date

    Section applicable with respect to academic year 1988-1989 and 
succeeding academic years, see section 405(b) of Pub. L. 99-498, as 
amended, set out as a note under section 1087dd of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1087aa, 1087cc, 1087dd, 
1087ff, 1089, 1095 of this title.
