116 STAT. 2580 PUBLIC LAW 107-314—DEC. 2, 2002 loan to a member of the Armed Forces that is made, insured, or guaranteed under this part, the Secretary shall pay the interest and special allowance on such loan as due for a period not in excess of 36 consecutive months. The Secretary may not pay interest or any special allowance on such a loan out of any funds other than funds that have been so transferred. "(2) FORBEARANCE. —During the period in which the Secretary is making payments on a loan under paragraph (1), the lender shall grant the borrower forbearance in accordance with the guaranty agreement under subsection (c)(3)(A)(i)(IV). "(3) SPECIAL ALLOWANCE DEFINED. —For the purposes of this subsection, the term 'special allowance', means a special allowance that is payable with respect to a loan under section 438.". (c) FEDERAL DIRECT LOANS. —Section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e) is amended by adding at the end the following new subsection: "(1) ARMED FORCES STUDENT LOAN INTEREST PAYMENT PRO- GRAM. — "(1) AUTHORITY. —Using funds received by transfer to the Secretary under section 2174 of title 10, United States Code, for the payment of interest on a loan made under this part to a member of the Armed Forces, the Secretary shall pay the interest on the loan as due for a period not in excess of 36 consecutive months. The Secretary may not pay interest on such a loan out of any funds other than funds that have been so transferred. "(2) FORBEARANCE.— During the period in which the Secretary is making payments on a loan under paragraph (1), the Secretary shall grant the borrower forbearance, in the form of a temporary cessation of all payments on the loan other than the payments of interest on the loan that are made under that paragraph.". (d) FEDERAL PERKINS LOANS.— Section 464 of the Higher Education Act of 1965 (20 U.S.C. 1087dd) is amended— (1) in subsection (e)— (A) by striking "or" at the end of paragraph (1); (B) by striking the period at the end of paragraph (2) and inserting "; or"; and (C) by adding at the end the following new paragraph: "(3) the borrower is eligible for interest payments to be made on such loan for service in the Armed Forces under section 2174 of title 10, United States Code, and, pursuant to that eligibility, the interest on such loan is being paid under subsection (j), except that the form of a forbearance under this paragraph shall be a temporary cessation of all payments on the loan other than payments of interest on the loan that are made under subsection (j)."; and (2) by adding at the end the following new subsection: " (j) ARMED FORCES STUDENT LOAN INTEREST PAYMENT PRO- GRAM. — "(1) AUTHORITY.— Using funds received by transfer to the Secretary under section 2174 of title 10, United States Code, for the payment of interest on a loan made under this part to a member of the Armed Forces, the Secretary shall pay the interest on the loan as due for a period not in excess of 36 consecutive months. The Secretary may not pay interest
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