[USC02] 20 USC CHAPTER 28, SUBCHAPTER IV, Part B: Federal Family Education Loan Program
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20 USC CHAPTER 28, SUBCHAPTER IV, Part B: Federal Family Education Loan Program
From Title 20—EDUCATIONCHAPTER 28—HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCESUBCHAPTER IV—STUDENT ASSISTANCE

Part B—Federal Family Education Loan Program

Codification

Part B of title IV of the Higher Education Act of 1965, comprising this part, was originally enacted by Pub. L. 89–329, title IV, Nov. 8, 1965, 79 Stat. 1236, and amended by Pub. L. 89–698, Oct. 29, 1966, 80 Stat. 1066; Pub. L. 89–752, Nov. 3, 1966, 80 Stat. 1240; Pub. L. 89–794, Nov. 8, 1966, 80 Stat. 1451; Pub. L. 90–460, Aug. 3, 1968, 82 Stat. 634; Pub. L. 90–575, Oct. 16, 1968, 82 Stat. 1014; Pub. L. 91–206, Mar. 10, 1970, 84 Stat. 49; Pub. L. 92–318, June 23, 1972, 86 Stat. 235; Pub. L. 93–269, Apr. 18, 1974, 88 Stat. 87; Pub. L. 93–604, Jan. 2, 1975, 88 Stat. 1959; Pub. L. 94–273, Apr. 21, 1976, 90 Stat. 375; Pub. L. 94–328, June 30, 1976, 90 Stat. 727; Pub. L. 94–482, Oct. 12, 1976, 90 Stat. 2081; S. Res. 4, Feb. 4, 1977; Pub. L. 95–43, June 15, 1977, 91 Stat. 213; Pub. L. 95–561, Nov. 1, 1978, 92 Stat. 2143; Pub. L. 95–566, Nov. 1, 1978, 92 Stat. 2402; Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2549; Pub. L. 95–630, Nov. 10, 1978, 92 Stat. 3641; S. Res. 30, Mar. 7, 1979; Pub. L. 96–49, Aug. 13, 1979, 93 Stat. 351; Pub. L. 96–88, Oct. 17, 1979, 93 Stat. 668; Pub. L. 96–374, Oct. 3, 1980, 94 Stat. 1367; Pub. L. 97–35, Aug. 13, 1981, 95 Stat. 357; Pub. L. 97–115, Dec. 29, 1981, 95 Stat. 1595; Pub. L. 97–301, Oct. 13, 1982, 96 Stat. 1400; Pub. L. 98–79, Aug. 15, 1983, 97 Stat. 476; Pub. L. 99–272, Apr. 7, 1986, 100 Stat. 82; Pub. L. 99–320, May 23, 1986, 100 Stat. 491. Such part is shown herein, however, as having been added by Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1353, without reference to such intervening amendments because of the extensive revision of part B by Pub. L. 99–498.

§1071. Statement of purpose; nondiscrimination; and appropriations authorized

(a) Purpose; discrimination prohibited

(1) Purpose

The purpose of this part is to enable the Secretary—

(A) to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions (as defined in section 1085 of this title),

(B) to provide a Federal program of student loan insurance for students or lenders who do not have reasonable access to a State or private nonprofit program of student loan insurance covered by an agreement under section 1078(b) of this title,

(C) to pay a portion of the interest on loans to qualified students which are insured under this part, and

(D) to guarantee a portion of each loan insured under a program of a State or of a nonprofit private institution or organization which meets the requirements of section 1078(a)(1)(B) of this title.

(2) Discrimination by creditors prohibited

No agency, organization, institution, bank, credit union, corporation, or other lender who regularly extends, renews, or continues credit or provides insurance under this part shall exclude from receipt or deny the benefits of, or discriminate against any borrower or applicant in obtaining, such credit or insurance on the basis of race, national origin, religion, sex, marital status, age, or handicapped status.

(b) Authorization of appropriations

For the purpose of carrying out this part—

(1) there are authorized to be appropriated to the student loan insurance fund (established by section 1081 of this title) (A) the sum of $1,000,000, and (B) such further sums, if any, as may become necessary for the adequacy of the student loan insurance fund,

(2) there are authorized to be appropriated, for payments under section 1078 of this title with respect to interest on student loans and for payments under section 1087 of this title, such sums for the fiscal year ending June 30, 1966, and succeeding fiscal years, as may be required therefor,

(3) there is authorized to be appropriated the sum of $17,500,000 for making advances pursuant to section 1072 of this title for the reserve funds of State and nonprofit private student loan insurance programs,

(4) there are authorized to be appropriated (A) the sum of $12,500,000 for making advances after June 30, 1968, pursuant to sections 1072(a) and (b) of this title, and (B) such sums as may be necessary for making advances pursuant to section 1072(c) of this title, for the reserve funds of State and nonprofit private student loan insurance programs,

(5) there are authorized to be appropriated such sums as may be necessary for the purpose of paying a loan processing and issuance fee in accordance with section 1078(f) of this title to guaranty agencies, and

(6) there is authorized to be appropriated, and there are appropriated, out of any money in the Treasury not otherwise appropriated, such sums as may be necessary for the purpose of carrying out section 1072(c)(7) of this title.


Sums appropriated under paragraphs (1), (2), (4), and (5) of this subsection shall remain available until expended, except that no sums may be expended after June 30, 2010, with respect to loans under this part for which the first disbursement is after such date. No additional sums are authorized to be appropriated under paragraph (3) or (4) of this subsection by reason of the reenactment of such paragraphs by the Higher Education Amendments of 1986.

(c) Designation

The program established under this part shall be referred to as the "Robert T. Stafford Federal Student Loan Program". Loans made pursuant to sections 1077 and 1078 of this title shall be known as "Federal Stafford Loans".

(d) Termination of authority to make or insure new loans

Notwithstanding paragraphs (1) through (6) of subsection (b) or any other provision of law—

(1) no new loans (including consolidation loans) may be made or insured under this part after June 30, 2010; and

(2) no funds are authorized to be appropriated, or may be expended, under this chapter or any other Act to make or insure loans under this part (including consolidation loans) for which the first disbursement is after June 30, 2010,


except as expressly authorized by an Act of Congress enacted after March 30, 2010.

(Pub. L. 89–329, title IV, §421, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1353; amended Pub. L. 100–297, title II, §2601(a), Apr. 28, 1988, 102 Stat. 330; Pub. L. 100–369, §8, July 18, 1988, 102 Stat. 837; Pub. L. 102–325, title IV, §411(a)(2), (c), July 23, 1992, 106 Stat. 510, 511; Pub. L. 105–244, title IV, §411, Oct. 7, 1998, 112 Stat. 1673; Pub. L. 109–171, title VIII, §8004(a), Feb. 8, 2006, 120 Stat. 158; Pub. L. 110–227, §6(a), May 7, 2008, 122 Stat. 746; Pub. L. 111–152, title II, §2201, Mar. 30, 2010, 124 Stat. 1074.)

References in Text

The Higher Education Amendments of 1986, referred to in subsec. (b), is Pub. L. 99–498, Oct. 17, 1986, 100 Stat. 1268. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of this title and Tables.

Codification

Another section 411 of Pub. L. 105–244 enacted subpart 8 (§1070f et seq.) of part A of this subchapter.

Prior Provisions

A prior section 1071, Pub. L. 89–329, title IV, §421, Nov. 8, 1965, 79 Stat. 1236; Pub. L. 90–460, §§2(b)(3), 3(a), Aug. 3, 1968, 82 Stat. 635, 636; Pub. L. 90–575, title I, §§113(b)(1), 114(a), 119(b), Oct. 16, 1968, 82 Stat. 1021, 1027; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2099; Pub. L. 95–43, §1(a)(8)–(10), June 15, 1977, 91 Stat. 213; Pub. L. 96–374, title XIII, §1391(a)(1), (2), Oct. 3, 1980, 94 Stat. 1503; Pub. L. 98–79, §6, Aug. 15, 1983, 97 Stat. 482, related to statement of purpose of, appropriations for, and implementation of programs to provide low-interest insured loans to students in institutions of higher education, prior to the general revision of this part by Pub. L. 99–498.

Amendments

2010—Subsec. (b). Pub. L. 111–152, §2201(1), inserted ", except that no sums may be expended after June 30, 2010, with respect to loans under this part for which the first disbursement is after such date" after "expended" in concluding provisions.

Subsec. (d). Pub. L. 111–152, §2201(2), added subsec. (d).

2008—Subsec. (b)(6). Pub. L. 110–227 added par. (6).

2006—Subsec. (b)(5). Pub. L. 109–171 substituted "a loan processing and issuance fee" for "an administrative cost allowance".

1998—Subsec. (d). Pub. L. 105–244 struck out heading and text of subsec. (d). Text read as follows: "Notwithstanding any other provision of this part, no new loan guarantees shall be issued after June 30, 1994, if the Secretary does not issue final regulations implementing the changes made to this part under the Higher Education Amendments of 1992 prior to that date. The authority to issue new loan guarantees shall resume upon the Secretary's issuance of such regulations. This subsection shall not provide the basis for avoiding any requirements for notice and public hearing on such regulations."

1992—Subsec. (c). Pub. L. 102–325, §411(a)(2), added subsec. (c) and struck out former subsec. (c) which read as follows: "The program established under this part shall be referred to as the 'Robert T. Stafford Student Loan Program'. Loans made under this part shall be known as 'Stafford Loans'."

Subsec. (d). Pub. L. 102–325, §411(c), added subsec. (d).

1988—Subsec. (c). Pub. L. 100–369 substituted "shall be referred" for "may be referred" and inserted provision identifying loans made under this part as "Stafford Loans".

Pub. L. 100–297 added subsec. (c).

Effective Date of 2008 Amendment

Pub. L. 110–227, §6(b), May 7, 2008, 122 Stat. 746, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the date of enactment of this Act [May 7, 2008]."

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–325 effective July 23, 1992, with changes in the designation or names of loans or programs under this part effective with respect to applications or other documents (used in making such loans) that are printed after July 23, 1992, see section 432 of Pub. L. 102–325, set out as a note under section 1078 of this title.

Effective Date of 1988 Amendment

Pub. L. 100–297, title VI, §6303, Apr. 28, 1988, 102 Stat. 431, as amended by Pub. L. 100–351, June 27, 1988, 102 Stat. 661; Pub. L. 106–400, §2, Oct. 30, 2000, 114 Stat. 1675, provided that:

"(a) General Rule.—Except as otherwise provided, this Act and the amendments made by this Act [see Tables for classification] shall take effect July 1, 1988.

"(b) Special Rules.—(1) Any provision of this Act or any amendment made by this Act which authorizes appropriations for fiscal year 1988 shall take effect on the date of the enactment of this Act [Apr. 28, 1988].

"(2) The provisions of section 2402, relating to the National Center for Vocational Research, shall take effect on April 10, 1988.

"(3) The amendments made by section 3403 [amending sections 1221e and 1221e–1 of this title] shall take effect for assessments made after September 30, 1989, with respect to State data.

"(4) Allotments to States made under chapters 1 and 2 of title I of the Elementary and Secondary Education Act of 1965 [formerly 20 U.S.C. 2701 et seq., 2911 et seq.] and under the Adult Education Act [formerly 20 U.S.C. 1201 et seq.] from amounts appropriated by the joint resolution entitled 'Joint resolution making further continuing appropriations for the fiscal year 1988, and for other purposes', approved December 22, 1987 (Public Law 100–202), shall be computed in accordance with the provisions of law applicable to allotments to States under chapters 1 and 2 of the Education Consolidation and Improvement Act of 1981 [formerly 20 U.S.C. 3801 et seq., 3811 et seq.] and under the Adult Education Act, respectively, as such Acts were in effect on the day before the date of the enactment of this Act [Apr. 28, 1988].

"(5) Amounts appropriated by the joint resolution entitled 'Joint resolution making further continuing appropriations for the fiscal year 1988, and for other purposes', approved December 22, 1987 (Public Law 100–202), for the following programs shall be awarded in accordance with the applicable provisions of law in effect on the day before the date of the enactment of this Act [Apr. 28, 1988]:

"(A) Programs under subchapter D of chapter 2 of the Education Consolidation and Improvement Act of 1981 [formerly 20 U.S.C. 3851 et seq.], except that projects under section 583(c) [formerly 20 U.S.C. 3851(c)] may not be reviewed by a program significance panel.

"(B) National programs under the Adult Education Act [formerly 20 U.S.C. 1201 et seq.].

"(C) Programs under the Indian Education Act [Pub. L. 92–318, title IV, see Tables for classification].

"(D) Programs under title II of the Education for Economic Security Act [formerly 20 U.S.C. 3961 et seq.].

"(E) The program under section 702 of the McKinney-Vento Homeless Assistance Act [formerly 42 U.S.C. 11421].

"(6) The provisions of part A of title II of this Act [§§2001 to 2034 of Pub. L. 100–297, amending sections 236 et seq. and 631 et seq. of this title], excluding sections 2014(e) and 2018 [amending section 238 of this title and enacting provisions set out as a note under section 238 of this title], shall apply only with respect to amounts appropriated for fiscal years beginning after September 30, 1988.

"(7) The amendments made by section 6001 [amending section 11421 of Title 42, The Public Health and Welfare], relating to literacy training of homeless adults, shall take effect on October 1, 1988.

"(8) Any election under section 5209(b)(1) [25 U.S.C. 2508(b)(1)] conveyed to the Secretary prior to August 1, 1988, shall take effect for the fiscal year beginning on October 1, 1988, and thereafter."

Effective Date

Pub. L. 99–498, title IV, §402(b)–(d), Oct. 17, 1986, 100 Stat. 1428, 1429, as amended by Pub. L. 100–50, §22(b), June 3, 1987, 101 Stat. 361, provided that:

"(b) Effective Dates.—The changes made in part B of title IV of the Act [20 U.S.C. 1071 et seq.] by the amendment made by subsection (a) of this section shall take effect on the date of enactment of this Act [Oct. 17, 1986], except—

"(1) as otherwise provided in such part B;

"(2) the changes in sections 427(a)(2)(C) and 428(b)(1)(M) of the Act [20 U.S.C. 1077(a)(2)(C), 1078(b)(1)(M)] (other than clauses (viii), (ix), and (x) of each such section) shall apply only to loans to new borrowers that (A) are made to cover the cost of instruction for periods of enrollment beginning on or after July 1, 1987; or (B) are disbursed on or after July 1, 1987;

"(3) the changes made in sections 425(a), 428(b)(1)(A), and 428(b)(1)(B) of the Act [20 U.S.C. 1075(a), 1078(b)(1)(A), (B)] shall apply with respect only to loans disbursed on or after January 1, 1987, or made to cover the costs of instruction for periods of enrollment beginning on or after January 1, 1987;

"(4) the changes made in subsections (a), (b), and (d) of section 433 of the Act [20 U.S.C. 1083(a), (b), (d)] shall apply with respect only to loans disbursed on or after January 1, 1987, or made to cover the costs of instruction for periods of enrollment beginning on or after January 1, 1987;

"(5) the changes in section 428(b)(1)(H) [20 U.S.C. 1078(b)(1)(H)] shall apply with respect only to loans for which the borrower files an application on or after July 1, 1987;

"(6) the changes in sections 435(d)(5) and 438(d) of the Act [20 U.S.C. 1085(d)(5), 1087–1(d)] shall take effect 30 days after the date of enactment of this Act [Oct. 17, 1986]; and

"(7) the changes made in section 438(b) [20 U.S.C. 1087–1(b)] shall take effect with respect to loans disbursed on or after 30 days after the date of enactment of this Act [Oct. 17, 1986] or made to cover the costs of instruction for periods of enrollment beginning on or after 30 days after the date of enactment of this Act.

"(c) Changes Effective Without Regard to Regulations; Republication of Regulations.—The changes made in part B of title IV of the Act [20 U.S.C. 1071 et seq.] by the amendment made by subsection (a) of this section shall be effective in accordance with subsection (b) of this section without regard to whether such changes are reflected in the regulations prescribed by the Secretary of Education for the purpose of such part.

"(d) New Borrowers.—For the purpose of this section, the term 'new borrower' means, with respect to any date, an individual who on that date has no outstanding balance of principal or interest owing on any loan made, insured, or guaranteed under part B of title IV of the Act [20 U.S.C. 1071 et seq.]."

Study of Role of Guaranty Agencies

Pub. L. 102–325, title XIV, §1401, July 23, 1992, 106 Stat. 816, directed Secretary of Education to review role of guaranty agencies within Federal Family Education Loan Program by examining administrative and financial operations of such agencies and the relationships between guaranty agencies and State governments and report to Congress within 1 year of July 23, 1992, on the review, prior to repeal by Pub. L. 105–332, §6(b)(2), Oct. 31, 1998, 112 Stat. 3128.

General Accounting Office Reports

Pub. L. 99–498, title XIII, §§1311–1314, Oct. 17, 1986, 100 Stat. 1583, 1584, as amended by Pub. L. 100–50, §23(6), June 3, 1987, 101 Stat. 362, directed Comptroller General to conduct studies on practices of State guaranty agencies and multistate guarantors under the student loan program, on the feasibility and efficiency of permitting students to establish multiple year lines of credit with eligible lenders, on the impact of the multiple disbursement system on the ability of students and institutions of higher education to meet expenses, and on the cost, efficiency, and impact of the consolidation loan program established by Pub. L. 99–498, and directed Comptroller General to make and submit a report to Congress on each study not later than two years after Oct. 17, 1986, prior to repeal by Pub. L. 105–332, §6(a), Oct. 31, 1998, 112 Stat. 3127.

§1072. Advances for reserve funds of State and nonprofit private loan insurance programs

(a) Purpose of and authority for advances to reserve funds

(1) Purpose; eligible recipients

From sums appropriated pursuant to paragraphs (3) and (4)(A) of section 1071(b) of this title, the Secretary is authorized to make advances to any State with which the Secretary has made an agreement pursuant to section 1078(b) of this title for the purpose of helping to establish or strengthen the reserve fund of the student loan insurance program covered by that agreement. If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursuant to section 1078(b) of this title, and the Secretary determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make advances for such year for the same purpose to one or more nonprofit private institutions or organizations with which the Secretary has made an agreement pursuant to section 1078(b) of this title in order to enable students in the State to participate in a program of student loan insurance covered by such an agreement. The Secretary may make advances under this subsection both to a State program (with which he has such an agreement) and to one or more nonprofit private institutions or organizations (with which he has such an agreement) in that State if he determines that such advances are necessary in order that students in each eligible institution have access through such institution to a student loan insurance program which meets the requirements of section 1078(b)(1) of this title.

(2) Matching requirement

No advance shall be made after June 30, 1968, unless matched by an equal amount from non-Federal sources. Such equal amount may include the unencumbered non-Federal portion of a reserve fund. As used in the preceding sentence, the term "unencumbered non-Federal portion" means the amount (determined as of the time immediately preceding the making of the advance) of the reserve fund less the greater of—

(A) the sum of—

(i) advances made under this section prior to July 1, 1968;

(ii) an amount equal to twice the amount of advances made under this section after June 30, 1968, and before the advance for purposes of which the determination is made; and

(iii) the proceeds of earnings on advances made under this section; or


(B) any amount which is required to be maintained in such fund pursuant to State law or regulation, or by agreement with lenders, as a reserve against the insurance of outstanding loans.


Except as provided in section 1078(c)(9)(E) or (F) of this title, such unencumbered non-Federal portion shall not be subject to recall, repayment, or recovery by the Secretary.

(3) Terms and conditions; repayment

Advances pursuant to this subsection shall be upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of section 1078(b) of this title as the Secretary determines will best carry out the purpose of this section. Advances made by the Secretary under this subsection shall be repaid within such period as the Secretary may deem to be appropriate in each case in the light of the maturity and solvency of the reserve fund for which the advance was made.

(b) Limitations on total advances

(1) In general

The total of the advances from the sums appropriated pursuant to paragraph (4)(A) of section 1071(b) of this title to nonprofit private institutions and organizations for the benefit of students in any State and to such State may not exceed an amount which bears the same ratio to such sums as the population of such State aged 18 to 22, inclusive, bears to the population of all the States aged 18 to 22 inclusive, but such advances may otherwise be in such amounts as the Secretary determines will best achieve the purposes for which they are made. The amount available for advances to any State shall not be less than $25,000 and any additional funds needed to meet this requirement shall be derived by proportionately reducing (but not below $25,000) the amount available for advances to each of the remaining States.

(2) Calculation of population

For the purpose of this subsection, the population aged 18 to 22, inclusive, of each State and of all the States shall be determined by the Secretary on the basis of the most recent satisfactory data available to him.

(c) Advances for insurance obligations

(1) Use for payment of insurance obligations

From sums appropriated pursuant to section 1071(b)(4)(B) of this title, the Secretary shall advance to each State which has an agreement with the Secretary under section 1078(c) of this title with respect to a student loan insurance program, an amount determined in accordance with paragraph (2) of this subsection to be used for the purpose of making payments under the State's insurance obligations under such program.

(2) Amount of advances

(A) Except as provided in subparagraph (B), the amount to be advanced to each such State shall be equal to 10 percent of the principal amount of loans made by lenders and insured by such agency on those loans on which the first payment of principal became due during the fiscal year immediately preceding the fiscal year in which the advance is made.

(B) The amount of any advance determined according to subparagraph (A) of this paragraph shall be reduced by—

(i) the amount of any advance or advances made to such State pursuant to this subsection at an earlier date; and

(ii) the amount of the unspent balance of the advances made to a State pursuant to subsection (a).


Notwithstanding subparagraph (A) and the preceding sentence of this subparagraph, but subject to subparagraph (D) of this paragraph, the amount of any advance to a State described in paragraph (5)(A) for the first year of its eligibility under such paragraph, and the amount of any advance to any State described in paragraph (5)(B) for each year of its eligibility under such paragraph, shall not be less than $50,000.

(C) For the purpose of subparagraph (B), the unspent balance of the advances made to a State pursuant to subsection (a) shall be that portion of the balance of the State's reserve fund (remaining at the time of the State's first request for an advance pursuant to this subsection) which bears the same ratio to such balance as the Federal advances made and not returned by such State, pursuant to subsection (a), bears to the total of all past contributions to such reserve funds from all sources (other than interest on investment of any portion of the reserve fund) contributed since the date such State executed an agreement pursuant to section 1078(b) of this title.

(D) If the sums appropriated for any fiscal year for paying the amounts determined under subparagraphs (A) and (B) are not sufficient to pay such amounts in full, then such amounts shall be reduced—

(i) by ratably reducing that portion of the amount allocated to each State which exceeds $50,000; and

(ii) if further reduction is required, by equally reducing the $50,000 minimum allocation of each State.


If additional sums become available for paying such amounts for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.

(3) Use of earnings for insurance obligations

The earnings, if any, on any investments of advances received pursuant to this subsection must be used for making payments under the State's insurance obligations.

(4) Repayment of advances

Advances made by the Secretary under this subsection shall, subject to subsection (d), be repaid within such period as the Secretary may deem to be appropriate and shall be deposited in the fund established by section 1081 of this title.

(5) Limitation on number of advances

Except as provided in paragraph (7), advances pursuant to this subsection shall be made to a State—

(A) in the case of a State which is actively carrying on a program under an agreement pursuant to section 1078(b) of this title which was entered into before October 12, 1976, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the 2 succeeding calendar years after the date so requested; and

(B) in the case of a State which enters into an agreement pursuant to section 1078(b) of this title on or after October 12, 1976, or which is not actively carrying on a program under an agreement pursuant to such section on such date, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the 4 succeeding calendar years after the date so requested of the advance.

(6) Payment of advances where no State program

(A) If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursuant to section 1078(b) of this title, and the Secretary determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make advances pursuant to this subsection for such year for the same purpose to one or more nonprofit private institutions or organizations with which he has made an agreement pursuant to subsection (c), as well as subsection (b), of section 1078 of this title and subparagraph (B) of this paragraph in order to enable students in that State to participate in a program of student loan insurance covered by such agreements.

(B) The Secretary may enter into an agreement with a private nonprofit institution or organization for the purpose of this paragraph under which such institution or organization—

(i) agrees to establish within such State at least one office with sufficient staff to handle written, electronic, and telephone inquiries from students, eligible lenders, and other persons in the State, to encourage maximum commercial lender participation within the State, and to conduct periodic visits to at least the major eligible lenders within the State;

(ii) agrees that its insurance will not be denied any student because of his or her choice of eligible institutions; and

(iii) certifies that it is neither an eligible institution, nor has any substantial affiliation with an eligible institution.

(7) Emergency advances

The Secretary is authorized to make advances, on terms and conditions satisfactory to the Secretary, to a guaranty agency—

(A) in accordance with section 1078(j) of this title, in order to ensure that the guaranty agency shall make loans as the lender-of-last-resort; or

(B) if the Secretary is seeking to terminate the guaranty agency's agreement, or assuming the guaranty agency's functions, in accordance with section 1078(c)(9)(F)(v) of this title, in order to assist the agency in meeting its immediate cash needs, ensure the uninterrupted payment of claims, or ensure that the guaranty agency shall make loans as described in subparagraph (A).

(d) Recovery of advances during fiscal years 1988 and 1989

(1) Amount and use of recovered funds

Notwithstanding any other provision of this section, advances made by the Secretary under this section shall be repaid in accordance with this subsection and shall be deposited in the fund established by section 1081 of this title. The Secretary shall, in accordance with the requirements of paragraph (2), recover (and so deposit) an amount equal to $75,000,000 during fiscal year 1988 and an amount equal to $35,000,000 for fiscal year 1989.

(2) Determination of guaranty agency obligations

In determining the amount of advances which shall be repaid by a guaranty agency under paragraph (1), the Secretary—

(A) shall consider the solvency and maturity of the reserve and insurance funds of the guaranty agency assisted by such advances, as determined by the Comptroller General taking into account the requirements of State law as in effect on October 17, 1986;

(B) shall not seek repayment of such advances from any State described in subsection (c)(5)(B) during any year of its eligibility under such subsection; and

(C) shall not seek repayment of such advances from any State if such repayment encumbers the reserve fund requirement of State law as in effect on October 17, 1986.

(e) Correction for errors under reduction of excess cash reserves

(1) In general

The Secretary shall pay any guaranty agency the amount of reimbursement of claims under section 1078(c)(1) of this title, filed between September 1, 1988, and December 31, 1989, which were previously withheld or canceled in order to be applied to satisfy such agency's obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986, if such maximum cash reserve was miscalculated because of erroneous financial information provided by such agency to the Secretary and if (A) such erroneous information is verified by an audited financial statement of the reserve fund, signed by a certified public accountant, and (B) such audited financial statement is provided to the Secretary prior to January 1, 1993.

(2) Amount

The amount of reimbursement for claims shall be equal to the amount of reimbursement for claims withheld or canceled in order to be applied to such agency's obligation to eliminate excess cash reserves which exceeds the amount of that which would have been withheld or canceled if the maximum excess cash reserves had been accurately calculated.

(f) Refund of cash reserve payments

The Secretary shall, within 30 days after July 23, 1992, pay the full amount of payments withheld or canceled under paragraph (3) of this subsection to any guaranty agency which—

(1) was required to eliminate excess cash reserves, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986;

(2) appealed the Secretary's demand that such agency should eliminate such excess cash reserves and received a waiver of a portion of the amount of such excess cash reserves to be eliminated;

(3) had payments under section 1078(c)(1) of this title or section 1078(f) of this title previously withheld or canceled in order to be applied to satisfy such agency's obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986; and

(4) according to a Department of Education review that was completed and forwarded to such guaranty agency prior to January 1, 1992, is expected to become insolvent during or before 1996 and the payments withheld or canceled under paragraph (3) of this subsection are a factor in such agency's impending insolvency.

(g) Preservation and recovery of guaranty agency reserves

(1) Authority to recover funds

Notwithstanding any other provision of law, the reserve funds of the guaranty agencies, and any assets purchased with such reserve funds, regardless of who holds or controls the reserves or assets, shall be considered to be the property of the United States to be used in the operation of the program authorized by this part. However, the Secretary may not require the return of all reserve funds of a guaranty agency to the Secretary unless the Secretary determines that such return is in the best interest of the operation of the program authorized by this part, or to ensure the proper maintenance of such agency's funds or assets or the orderly termination of the guaranty agency's operations and the liquidation of its assets. The reserves shall be maintained by each guaranty agency to pay program expenses and contingent liabilities, as authorized by the Secretary, except that—

(A) the Secretary may direct a guaranty agency to return to the Secretary a portion of its reserve fund which the Secretary determines is unnecessary to pay the program expenses and contingent liabilities of the guaranty agency;

(B) the Secretary may direct the guaranty agency to require the return, to the guaranty agency or to the Secretary, of any reserve funds or assets held by, or under the control of, any other entity, which the Secretary determines are necessary to pay the program expenses and contingent liabilities of the guaranty agency, or which are required for the orderly termination of the guaranty agency's operations and the liquidation of its assets;

(C) the Secretary may direct a guaranty agency, or such agency's officers or directors, to cease any activities involving expenditure, use or transfer of the guaranty agency's reserve funds or assets which the Secretary determines is a misapplication, misuse, or improper expenditure of such funds or assets; and

(D) any such determination under subparagraph (A) or (B) shall be based on standards prescribed by regulations that are developed through negotiated rulemaking and that include procedures for administrative due process.

(2) Termination provisions in contracts

(A) To ensure that the funds and assets of the guaranty agency are preserved, any contract with respect to the administration of a guaranty agency's reserve funds, or the administration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guaranty agency, or any other party on behalf of or with the concurrence of the guaranty agency, after August 10, 1993, shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract includes an impermissible transfer of the reserve funds or assets, or is otherwise inconsistent with the terms or purposes of this section.

(B) The Secretary may direct a guaranty agency to suspend or cease activities under any contract entered into by or on behalf of such agency after January 1, 1993, if the Secretary determines that the misuse or improper expenditure of such guaranty agency's funds or assets or such contract provides unnecessary or improper benefits to such agency's officers or directors.

(3) Penalties

Violation of any direction issued by the Secretary under this subsection may be subject to the penalties described in section 1097 of this title.

(4) Availability of funds

Any funds that are returned or otherwise recovered by the Secretary pursuant to this subsection shall be available for expenditure for expenses pursuant to section 1087h of this title.

(h) Recall of reserves; limitations on use of reserve funds and assets

(1) In general

Notwithstanding any other provision of law, the Secretary shall, except as otherwise provided in this subsection, recall $1,000,000,000 from the reserve funds held by guaranty agencies on September 1, 2002.

(2) Deposit

Funds recalled by the Secretary under this subsection shall be deposited in the Treasury.

(3) Required share

The Secretary shall require each guaranty agency to return reserve funds under paragraph (1) based on the agency's required share of recalled reserve funds held by guaranty agencies as of September 30, 1996. For purposes of this paragraph, a guaranty agency's required share of recalled reserve funds shall be determined as follows:

(A) The Secretary shall compute each guaranty agency's reserve ratio by dividing (i) the amount held in the agency's reserve funds as of September 30, 1996 (but reflecting later accounting or auditing adjustments approved by the Secretary), by (ii) the original principal amount of all loans for which the agency has an outstanding insurance obligation as of such date, including amounts of outstanding loans transferred to the agency from another guaranty agency.

(B) If the reserve ratio of any guaranty agency as computed under subparagraph (A) exceeds 2.0 percent, the agency's required share shall include so much of the amounts held in the agency's reserve funds as exceed a reserve ratio of 2.0 percent.

(C) If any additional amount is required to be recalled under paragraph (1) (after deducting the total of the required shares calculated under subparagraph (B)), such additional amount shall be obtained by imposing on each guaranty agency an equal percentage reduction in the amount of the agency's reserve funds remaining after deduction of the amount recalled under subparagraph (B), except that such percentage reduction under this subparagraph shall not result in the agency's reserve ratio being reduced below 0.58 percent. The equal percentage reduction shall be the percentage obtained by dividing—

(i) the additional amount required to be recalled (after deducting the total of the required shares calculated under subparagraph (B)), by

(ii) the total amount of all such agencies' reserve funds remaining (after deduction of the required shares calculated under such subparagraph).


(D) If any additional amount is required to be recalled under paragraph (1) (after deducting the total of the required shares calculated under subparagraphs (B) and (C)), such additional amount shall be obtained by imposing on each guaranty agency with a reserve ratio (after deducting the required shares calculated under such subparagraphs) in excess of 0.58 percent an equal percentage reduction in the amount of the agency's reserve funds remaining (after such deduction) that exceed a reserve ratio of 0.58 percent. The equal percentage reduction shall be the percentage obtained by dividing—

(i) the additional amount to be recalled under paragraph (1) (after deducting the amount recalled under subparagraphs (B) and (C)), by

(ii) the total amount of all such agencies' reserve funds remaining (after deduction of the required shares calculated under such subparagraphs) that exceed a reserve ratio of 0.58 percent.

(4) Restricted accounts required

(A) In general

Within 90 days after the beginning of each of the fiscal years 1998 through 2002, each guaranty agency shall transfer a portion of the agency's required share determined under paragraph (3) to a restricted account established by the agency that is of a type selected by the agency with the approval of the Secretary. Funds transferred to such restricted accounts shall be invested in obligations issued or guaranteed by the United States or in other similarly low-risk securities.

(B) Requirement

A guaranty agency shall not use the funds in such a restricted account for any purpose without the express written permission of the Secretary, except that a guaranty agency may use the earnings from such restricted account for default reduction activities.

(C) Installments

In each of fiscal years 1998 through 2002, each guaranty agency shall transfer the agency's required share to such restricted account in 5 equal annual installments, except that—

(i) a guaranty agency that has a reserve ratio (as computed under subparagraph (3)(A)) equal to or less than 1.10 percent may transfer the agency's required share to such account in 4 equal installments beginning in fiscal year 1999; and

(ii) a guaranty agency may transfer such required share to such account in accordance with such other payment schedules as are approved by the Secretary.

(5) Shortage

If, on September 1, 2002, the total amount in the restricted accounts described in paragraph (4) is less than the amount the Secretary is required to recall under paragraph (1), the Secretary shall require the return of the amount of the shortage from other reserve funds held by guaranty agencies under procedures established by the Secretary. The Secretary shall first attempt to obtain the amount of such shortage from each guaranty agency that failed to transfer the agency's required share to the agency's restricted account in accordance with paragraph (4).

(6) Enforcement

(A) In general

The Secretary may take such reasonable measures, and require such information, as may be necessary to ensure that guaranty agencies comply with the requirements of this subsection.

(B) Prohibition

If the Secretary determines that a guaranty agency has failed to transfer to a restricted account any portion of the agency's required share under this subsection, the agency may not receive any other funds under this part until the Secretary determines that the agency has so transferred the agency's required share.

(C) Waiver

The Secretary may waive the requirements of subparagraph (B) for a guaranty agency described in such subparagraph if the Secretary determines that there are extenuating circumstances beyond the control of the agency that justify such waiver.

(7) Limitation

(A) Restriction on other authority

The Secretary shall not have any authority to direct a guaranty agency to return reserve funds under subsection (g)(1)(A) during the period from August 5, 1997, through September 30, 2002.

(B) Use of termination collections

Any reserve funds directed by the Secretary to be returned to the Secretary under subsection (g)(1)(B) during such period that do not exceed a guaranty agency's required share of recalled reserve funds under paragraph (3)—

(i) shall be used to satisfy the agency's required share of recalled reserve funds; and

(ii) shall be deposited in the restricted account established by the agency under paragraph (4), without regard to whether such funds exceed the next installment required under such paragraph.

(C) Use of sanctions collections

Any reserve funds directed by the Secretary to be returned to the Secretary under subsection (g)(1)(C) during such period that do not exceed a guaranty agency's next installment under paragraph (4)—

(i) shall be used to satisfy the agency's next installment; and

(ii) shall be deposited in the restricted account established by the agency under paragraph (4).

(D) Balance available to Secretary

Any reserve funds directed by the Secretary to be returned to the Secretary under subparagraph (B) or (C) of subsection (g)(1) that remain after satisfaction of the requirements of subparagraphs (B) and (C) of this paragraph shall be deposited in the Treasury.

(8) Definitions

For the purposes of this subsection:

(A) Default reduction activities

The term "default reduction activities" means activities to reduce student loan defaults that improve, strengthen, and expand default prevention activities, such as—

(i) establishing a program of partial loan cancellation to reward disadvantaged borrowers for good repayment histories with their lenders;

(ii) establishing a financial and debt management counseling program for high-risk borrowers that provides long-term training (beginning prior to the first disbursement of the borrower's first student loan and continuing through the completion of the borrower's program of education or training) in budgeting and other aspects of financial management, including debt management;

(iii) establishing a program of placement counseling to assist high-risk borrowers in identifying employment or additional training opportunities; and

(iv) developing public service announcements that would detail consequences of student loan default and provide information regarding a toll-free telephone number established by the guaranty agency for use by borrowers seeking assistance in avoiding default.

(B) Reserve funds

The term "reserve funds" when used with respect to a guaranty agency—

(i) includes any reserve funds in cash or liquid assets held by the guaranty agency, or held by, or under the control of, any other entity; and

(ii) does not include buildings, equipment, or other nonliquid assets.

(i) Additional recall of reserves

(1) In general

Notwithstanding any other provision of law and subject to paragraph (4), the Secretary shall recall, from reserve funds held in the Federal Student Loan Reserve Funds established under section 1072a of this title by guaranty agencies—

(A) $85,000,000 in fiscal year 2002;

(B) $82,500,000 in fiscal year 2006; and

(C) $82,500,000 in fiscal year 2007.

(2) Deposit

Funds recalled by the Secretary under this subsection shall be deposited in the Treasury.

(3) Required share

The Secretary shall require each guaranty agency to return reserve funds under paragraph (1) on the basis of the agency's required share. For purposes of this paragraph, a guaranty agency's required share shall be determined as follows:

(A) Equal percentage

The Secretary shall require each guaranty agency to return an amount representing an equal percentage reduction in the amount of reserve funds held by the agency on September 30, 1996.

(B) Calculation

The equal percentage reduction shall be the percentage obtained by dividing—

(i) $250,000,000, by

(ii) the total amount of all guaranty agencies' reserve funds held on September 30, 1996, less any amounts subject to recall under subsection (h).

(C) Special rule

Notwithstanding subparagraphs (A) and (B), the percentage reduction under subparagraph (B) shall not result in the depletion of the reserve funds of any agency which charges the 1.0 percent insurance premium pursuant to section 1078(b)(1)(H) of this title below an amount equal to the amount of lender claim payments paid during the 90 days prior to the date of the return under this subsection. If any additional amount is required to be returned after deducting the total of the required shares under subparagraph (B) and as a result of the preceding sentence, such additional amount shall be obtained by imposing on each guaranty agency to which the preceding sentence does not apply, an equal percentage reduction in the amount of the agency's remaining reserve funds.

(4) Offset of required shares

If any guaranty agency returns to the Secretary any reserve funds in excess of the amount required under this subsection or subsection (h), the total amount required to be returned under paragraph (1) shall be reduced by the amount of such excess reserve funds returned.

(5) Definition of reserve funds

The term "reserve funds" when used with respect to a guaranty agency—

(A) includes any reserve funds in cash or liquid assets held by the guaranty agency, or held by, or under the control of, any other entity; and

(B) does not include buildings, equipment, or other nonliquid assets.

(Pub. L. 89–329, title IV, §422, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1354; amended Pub. L. 100–203, title III, §§3001(a), 3002(a), Dec. 22, 1987, 101 Stat. 1330–36, 1330-38; Pub. L. 102–325, title IV, §§412, 416(p)(8), July 23, 1992, 106 Stat. 511, 527; Pub. L. 103–66, title IV, §§4041(a), (2)(A), 4042, Aug. 10, 1993, 107 Stat. 354, 357; Pub. L. 103–208, §2(c)(1), Dec. 20, 1993, 107 Stat. 2460; Pub. L. 105–33, title VI, §6101(a), Aug. 5, 1997, 111 Stat. 648; Pub. L. 105–244, title IV, §412, Oct. 7, 1998, 112 Stat. 1673.)

Codification

Amendment by Pub. L. 103–208 (which was effective as if included in Pub. L. 102–325) was 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 1072, Pub. L. 89–329, title IV, §422, Nov. 8, 1965, 79 Stat. 1236; Pub. L. 89–752, §11, Nov. 3, 1966, 80 Stat. 1243; Pub. L. 90–575, title I, §114(b), (c), Oct. 16, 1968, 82 Stat. 1021, 1022; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2100; Pub. L. 95–43, §1(a)(11)–(13), June 15, 1977, 91 Stat. 213, 214; Pub. L. 95–561, title XIII, §1322(a), Nov. 1, 1978, 92 Stat. 2363; Pub. L. 96–374, title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1503; Pub. L. 99–272, title XVI, §16011, Apr. 7, 1986, 100 Stat. 339, authorized advances to establish or strengthen reserve funds of State and nonprofit private loan insurance programs, prior to the general revision of this part by Pub. L. 99–498.

Amendments

1998—Subsec. (a)(2). Pub. L. 105–244, §412(1), substituted "section 1078(c)(9)(E)" for "section 1078(c)(10)(E)" in concluding provisions.

Subsec. (c)(6)(B)(i). Pub. L. 105–244, §412(2)(A), substituted "written, electronic," for "written".

Subsec. (c)(7)(A). Pub. L. 105–244, §412(2)(B), struck out "during the transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this subchapter" after "lender-of-last-resort".

Subsec. (c)(7)(B). Pub. L. 105–244, §412(2)(C), substituted "section 1078(c)(9)(F)(v)" for "section 1078(c)(10)(F)(v)".

Subsec. (g)(1). Pub. L. 105–244, §412(3), struck out "or the program authorized by part D of this subchapter" after "program authorized by this part" in first and second sentences.

Subsec. (i). Pub. L. 105–244, §412(4), added subsec. (i).

1997—Subsec. (h). Pub. L. 105–33 added subsec. (h).

1993—Subsec. (c)(7). Pub. L. 103–66, §4041(a)(2)(A), substituted "to a guaranty agency—" and subpars. (A) and (B) for "to a guaranty agency in accordance with section 1078(c)(10)(F)(v) of this title in order to assist the agency in meeting its immediate cash needs and ensure the uninterrupted payment of default claims by lenders."

Subsec. (c)(7)(B). Pub. L. 103–208 substituted a period for semicolon at end. See Codification note above.

Subsec. (g). Pub. L. 103–66, §4042, added subsec. (g).

1992—Subsec. (a)(2). Pub. L. 102–325, §412(1), inserted at end "Except as provided in section 1078(c)(10)(E) or (F) of this title, such unencumbered non-Federal portion shall not be subject to recall, repayment, or recovery by the Secretary."

Subsec. (c)(5), (7). Pub. L. 102–325, §416(p)(8), substituted "Except as provided in paragraph (7), advances" for "Advances" in par. (5) and added par. (7).

Subsecs. (e), (f). Pub. L. 102–325, §412(2), added subsecs. (e) and (f).

1987—Subsec. (e). Pub. L. 100–203, §3002(a), struck out subsec. (e) which related to reduction of excess cash reserves.

Pub. L. 100–203, §3001(a), added subsec. (e).

Effective Date of 1998 Amendment

Amendment by 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

Pub. L. 100–203, title III, §3002(a), Dec. 22, 1987, 101 Stat. 1330–38, provided that the amendment made by that section is effective Sept. 30, 1989.

§1072a. Federal Student Loan Reserve Fund

(a) Establishment

Each guaranty agency shall, not later than 60 days after October 7, 1998, deposit all funds, securities, and other liquid assets contained in the reserve fund established pursuant to section 1072 of this title into a Federal Student Loan Reserve Fund (in this section and section 1072b of this title referred to as the "Federal Fund"), which shall be an account of a type selected by the agency, with the approval of the Secretary.

(b) Investment of funds

Funds transferred to the Federal Fund shall be invested in obligations issued or guaranteed by the United States or a State, or in other similarly low-risk securities selected by the guaranty agency, with the approval of the Secretary. Earnings from the Federal Fund shall be the sole property of the Federal Government.

(c) Additional deposits

After the establishment of the Federal Fund, a guaranty agency shall deposit into the Federal Fund—

(1) all amounts received from the Secretary as payment of reinsurance on loans pursuant to section 1078(c)(1) of this title;

(2) from amounts collected on behalf of the obligation of a defaulted borrower, a percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made—

(A) with respect to the defaulted loan pursuant to sections 1078(c)(6)(A) 1 and 1078–6(a)(1)(B) of this title; and

(B) with respect to a loan that the Secretary has repaid or discharged under section 1087 of this title;


(3) insurance premiums collected from borrowers pursuant to sections 1078(b)(1)(H) and 1078–8(h) of this title;

(4) all amounts received from the Secretary as payment for supplemental preclaims activity performed prior to October 7, 1998;

(5) 70 percent of amounts received after October 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to October 7, 1998; and

(6) other receipts as specified in regulations of the Secretary.

(d) Uses of funds

Subject to subsection (f), the Federal Fund may only be used by a guaranty agency—

(1) to pay lender claims pursuant to sections 1078(b)(1)(G), 1078(j), and 1087 of this title; and

(2) to pay into the Agency Operating Fund established pursuant to section 1072b of this title (in this section and section 1072b of this title referred to as the "Operating Fund") a default aversion fee in accordance with section 1078(l) of this title.

(e) Ownership of Federal Fund

The Federal Fund, and any nonliquid asset (such as a building or equipment) developed or purchased by the guaranty agency in whole or in part with Federal reserve funds, regardless of who holds or controls the Federal reserve funds or such asset, shall be considered to be the property of the United States, prorated based on the percentage of such asset developed or purchased with Federal reserve funds, which property shall be used in the operation of the program authorized by this part, as provided in subsection (d). The Secretary may restrict or regulate the use of such asset only to the extent necessary to reasonably protect the Secretary's prorated share of the value of such asset. The Secretary may direct a guaranty agency, or such agency's officers or directors, to cease any activity involving expenditures, use, or transfer of the Federal Fund administered by the guaranty agency that the Secretary determines is a misapplication, misuse, or improper expenditure of the Federal Fund or the Secretary's share of such asset.

(f) Transition

(1) In general

In order to establish the Operating Fund, each guaranty agency may transfer not more than 180 days' cash expenses for normal operating expenses (not including claim payments) as a working capital reserve as defined in Office of Management and Budget Circular A–87 (Cost Accounting Standards) from the Federal Fund for deposit into the Operating Fund for use in the performance of the guaranty agency's duties under this part. Such transfers may occur during the first 3 years following the establishment of the Operating Fund. However, no agency may transfer in excess of 45 percent of the balance, as of September 30, 1998, of the agency's Federal Fund to the agency's Operating Fund during such 3-year period. In determining the amount that may be transferred, the agency shall ensure that sufficient funds remain in the Federal Fund to pay lender claims within the required time periods and to meet the reserve recall requirements of this section and subsections (h) and (i) of section 1072 of this title.

(2) Special rule

A limited number of guaranty agencies may transfer interest earned on the Federal Fund to the Operating Fund during the first 3 years after October 7, 1998, if the guaranty agency demonstrates to the Secretary that—

(A) the cash flow in the Operating Fund will be negative without the transfer of such interest; and

(B) the transfer of such interest will substantially improve the financial circumstances of the guaranty agency.

(3) Repayment provisions

Each guaranty agency shall begin repayment of sums transferred pursuant to this subsection not later than the start of the fourth year after the establishment of the Operating Fund, and shall repay all amounts transferred not later than 5 years from the date of the establishment of the Operating Fund. With respect to amounts transferred from the Federal Fund, the guaranty agency shall not be required to repay any interest on the funds transferred and subsequently repaid. The guaranty agency shall provide to the Secretary a reasonable schedule for repayment of the sums transferred and an annual financial analysis demonstrating the agency's ability to comply with the schedule and repay all outstanding sums transferred.

(4) Prohibition

If a guaranty agency transfers funds from the Federal Fund in accordance with this section, and fails to make scheduled repayments to the Federal Fund, the agency may not receive any other funds under this part until the Secretary determines that the agency has made such repayments. The Secretary shall pay to the guaranty agency any funds withheld in accordance with this paragraph immediately upon making the determination that the guaranty agency has made all such repayments.

(5) Waiver

The Secretary may—

(A) waive the requirements of paragraph (3), but only with respect to repayment of interest that was transferred in accordance with paragraph (2); and

(B) waive paragraph (4);


for a guaranty agency, if the Secretary determines that there are extenuating circumstances (such as State constitutional prohibitions) beyond the control of the agency that justify such a waiver.

(6) Extension of repayment period for interest

(A) Extension permitted

The Secretary shall extend the period for repayment of interest that was transferred in accordance with paragraph (2) from 2 years to 5 years if the Secretary determines that—

(i) the cash flow of the Operating Fund will be negative as a result of repayment as required by paragraph (3);

(ii) the repayment of the interest transferred will substantially diminish the financial circumstances of the guaranty agency; and

(iii) the guaranty agency has demonstrated—

(I) that the agency is able to repay all transferred funds by the end of the 8th year following the date of establishment of the Operating Fund; and

(II) that the agency will be financially sound on the completion of repayment.

(B) Repayment of income on transferred funds

All repayments made to the Federal Fund during the 6th, 7th, and 8th years following the establishment of the Operating Fund of interest that was transferred shall include the sums transferred plus any income earned from the investment of the sums transferred after the 5th year.

(7) Investment of Federal funds

Funds transferred from the Federal Fund to the Operating Fund for operating expenses shall be invested in obligations issued or guaranteed by the United States or a State, or in other similarly low-risk securities selected by the guaranty agency, with the approval of the Secretary.

(8) Special rule

In calculating the minimum reserve level required by section 1078(c)(9)(A) of this title, the Secretary shall include all amounts owed to the Federal Fund by the guaranty agency in the calculation.

(Pub. L. 89–329, title IV, §422A, as added Pub. L. 105–244, title IV, §413(a), Oct. 7, 1998, 112 Stat. 1674; amended Pub. L. 110–315, title IV, §438(a)(1), Aug. 14, 2008, 122 Stat. 3258.)

References in Text

Section 1078(c)(6)(A) of this title, referred to in subsec. (c)(2)(A), was redesignated section 1078(c)(6)(A)(i) of this title by Pub. L. 109–171, title VIII, §8014(d)(3)(A), (B), Feb. 8, 2006, 120 Stat. 170.

Amendments

2008—Subsec. (d)(1). Pub. L. 110–315 substituted "and 1087" for "1087, and 1087–2(q)".

Effective Date

Section effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as an Effective Date of 1998 Amendment note under section 1001 of this title.

1 See References in Text note below.

§1072b. Agency Operating Fund

(a) Establishment

Each guaranty agency shall, not later than 60 days after October 7, 1998, establish a fund designated as the Operating Fund.

(b) Investment of funds

Funds deposited into the Operating Fund shall be invested at the discretion of the guaranty agency in accordance with prudent investor standards.

(c) Additional deposits

After the establishment of the Operating Fund, the guaranty agency shall deposit into the Operating Fund—

(1) the loan processing and issuance fee paid by the Secretary pursuant to section 1078(f) of this title;

(2) 30 percent of amounts received after October 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to October 7, 1998;

(3) the account maintenance fee paid by the Secretary in accordance with section 1087h of this title;

(4) the default aversion fee paid in accordance with section 1078(l) of this title;

(5) amounts remaining pursuant to section 1078(c)(6)(B) 1 of this title from collection on defaulted loans held by the agency, after payment of the Secretary's equitable share, excluding amounts deposited in the Federal Fund pursuant to section 1072a(c)(2) of this title; and

(6) other receipts as specified in regulations of the Secretary.

(d) Uses of funds

(1) In general

Funds in the Operating Fund shall be used for application processing, loan disbursement, enrollment and repayment status management, default aversion activities (including those described in section 1072(h)(8) of this title), default collection activities, school and lender training, financial aid awareness and related outreach activities, compliance monitoring, and other student financial aid related activities, as selected by the guaranty agency.

(2) Special rule

The guaranty agency may, in the agency's discretion, transfer funds from the Operating Fund to the Federal Fund for use pursuant to section 1072a of this title. Such transfer shall be irrevocable, and any funds so transferred shall become the sole property of the United States.

(3) Definitions

For purposes of this subsection:

(A) Default collection activities

The term "default collection activities" means activities of a guaranty agency that are directly related to the collection of the loan on which a default claim has been paid to the participating lender, including the due diligence activities required pursuant to regulations of the Secretary.

(B) Default aversion activities

The term "default aversion activities" means activities of a guaranty agency that are directly related to providing collection assistance to the lender on a delinquent loan, prior to the loan's being legally in a default status, including due diligence activities required pursuant to regulations of the Secretary.

(C) Enrollment and repayment status management

The term "enrollment and repayment status management" means activities of a guaranty agency that are directly related to ascertaining the student's enrollment status, including prompt notification to the lender of such status, an audit of the note or written agreement to determine if the provisions of that note or agreement are consistent with the records of the guaranty agency as to the principal amount of the loan guaranteed, and an examination of the note or agreement to assure that the repayment provisions are consistent with the provisions of this part.

(e) Ownership and regulation of Operating Fund

(1) Ownership

The Operating Fund, with the exception of funds transferred from the Federal Fund in accordance with section 1072a(f) of this title, shall be considered to be the property of the guaranty agency.

(2) Regulation

Except as provided in paragraph (3), the Secretary may not regulate the uses or expenditure of moneys in the Operating Fund, but the Secretary may require such necessary reports and audits as provided in section 1078(b)(2) of this title.

(3) Exception

Notwithstanding paragraphs (1) and (2), during any period in which funds are owed to the Federal Fund as a result of transfer under section 1072a(f) of this title

(A) moneys in the Operating Fund may only be used for expenses related to the student loan programs authorized under this part; and

(B) the Secretary may regulate the uses or expenditure of moneys in the Operating Fund.

(Pub. L. 89–329, title IV, §422B, as added Pub. L. 105–244, title IV, §413(b), Oct. 7, 1998, 112 Stat. 1677.)

References in Text

Section 1078(c)(6)(B) of this title, referred to in subsec. (c)(5), was redesignated section 1078(c)(6)(A)(ii) of this title by Pub. L. 109–171, title VIII, §8014(d)(3)(A), (B), Feb. 8, 2006, 120 Stat. 170.

Effective Date

Section effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as an Effective Date of 1998 Amendment note under section 1001 of this title.

1 See References in Text note below.

§1073. Effects of adequate non-Federal programs

(a) Federal insurance barred to lenders with access to State or private insurance

Except as provided in subsection (b), the Secretary shall not issue certificates of insurance under section 1079 of this title to lenders in a State if the Secretary determines that every eligible institution has reasonable access in that State to a State or private nonprofit student loan insurance program which is covered by an agreement under section 1078(b) of this title.

(b) Exceptions

The Secretary may issue certificates of insurance under section 1079 of this title to a lender in a State—

(1) for insurance of a loan made to a student borrower who does not, by reason of the borrower's residence, have access to loan insurance under the loan insurance program of such State (or under any private nonprofit loan insurance program which has received an advance under section 1072 of this title for the benefit of students in such State);

(2) for insurance of all the loans made to student borrowers by a lender who satisfies the Secretary that, by reason of the residence of such borrowers, such lender will not have access to any single State or nonprofit private loan insurance program which will insure substantially all of the loans such lender intends to make to such student borrowers; or

(3) under such circumstances as may be approved by the guaranty agency in such State, for the insurance of a loan to a borrower for whom such lender previously was issued such a certificate if the loan covered by such certificate is not yet repaid.

(Pub. L. 89–329, title IV, §423, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1358.)

Prior Provisions

A prior section 1073, Pub. L. 89–329, title IV, §423, Nov. 8, 1965, 79 Stat. 1237; Pub. L. 90–575, title I, §119(a), Oct. 16, 1968, 82 Stat. 1026; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2103; Pub. L. 95–43, §1(a)(14), June 15, 1977, 91 Stat. 214; Pub. L. 96–374, title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1503, limited participation in Federal loan insurance programs, prior to the general revision of this part by Pub. L. 99–498.

§1074. Scope and duration of Federal loan insurance program

(a) Limitations on amounts of loans covered by Federal insurance

The total principal amount of new loans made and installments paid pursuant to lines of credit (as defined in section 1085 of this title) to students covered by Federal loan insurance under this part shall not exceed $2,000,000,000 for the period from July 1, 1976, to September 30, 1976, for each of the succeeding fiscal years ending prior to October 1, 2009, and for the period from October 1, 2009, to June 30, 2010, for loans first disbursed on or before June 30, 2010.

(b) Apportionment of amounts

The Secretary may, if he or she finds it necessary to do so in order to assure an equitable distribution of the benefits of this part, assign, within the maximum amounts specified in subsection (a), Federal loan insurance quotas applicable to eligible lenders, or to States or areas, and may from time to time reassign unused portions of these quotas.

(Pub. L. 89–329, title IV, §424, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1358; amended Pub. L. 102–325, title IV, §411(b)(1), July 23, 1992, 106 Stat. 510; Pub. L. 105–33, title VI, §6104(1), Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–244, title IV, §414, Oct. 7, 1998, 112 Stat. 1679; Pub. L. 109–171, title VIII, §8004(b)(1), Feb. 8, 2006, 120 Stat. 158; Pub. L. 110–315, title IV, §421, Aug. 14, 2008, 122 Stat. 3227; Pub. L. 111–152, title II, §2202, Mar. 30, 2010, 124 Stat. 1074.)

Prior Provisions

A prior section 1074, Pub. L. 89–329, title IV, §424, Nov. 8, 1965, 79 Stat. 1237; Pub. L. 90–460, §1(a)(1), Aug. 3, 1968, 82 Stat. 634; Pub. L. 90–575, title I, §112(a), Oct. 16, 1968, 82 Stat. 1020; Pub. L. 92–318, title I, §132(a), June 23, 1972, 86 Stat. 261; Pub. L. 94–328, §2(a), June 30, 1976, 90 Stat. 727; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2103; Pub. L. 96–374, title IV, §411(a), title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1415, 1503; Pub. L. 99–272, title XVI, §16018(a)(1), Apr. 7, 1986, 100 Stat. 348, related to new loans under Federal loan insurance program, prior to the general revision of this part by Pub. L. 99–498.

Amendments

2010—Subsec. (a). Pub. L. 111–152 substituted "September 30, 1976, for each of the succeeding fiscal years ending prior to October 1, 2009, and for the period from October 1, 2009, to June 30, 2010, for loans first disbursed on or before June 30, 2010." for "September 30, 1976, and for each of the succeeding fiscal years ending prior to October 1, 2014. Thereafter, Federal loan insurance pursuant to this part may be granted only for loans made (or for loan installments paid pursuant to lines of credit) to enable students, who have obtained prior loans insured under this part, to continue or complete their educational program; but no insurance may be granted for any loan made or installment paid after September 30, 2018."

2008—Subsec. (a). Pub. L. 110–315 substituted "October 1, 2014" for "October 1, 2012" and "September 30, 2018" for "September 30, 2016".

2006—Subsec. (a). Pub. L. 109–171 substituted "October 1, 2012" for "October 1, 2004" and "September 30, 2016" for "September 30, 2008".

1998—Subsec. (a). Pub. L. 105–244 substituted "October 1, 2004" for "October 1, 2002" and "September 30, 2008" for "September 30, 2006".

1997—Subsec. (a). Pub. L. 105–33 substituted "October 1, 2002" for "October 1, 1998" and "September 30, 2006" for "September 30, 2002".

1992—Subsec. (a). Pub. L. 102–325 substituted "October 1, 1998" for "October 1, 1992" and "September 30, 2002" for "September 30, 1997".

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 1998 Amendment

Amendment by 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.

§1075. Limitations on individual federally insured loans and on Federal loan insurance

(a) Annual and aggregate limits

(1) Annual limits

(A) The total of loans made to a student in any academic year or its equivalent (as determined by the Secretary) which may be covered by Federal loan insurance under this part may not exceed—

(i) in the case of a student at an eligible institution who has not successfully completed the first year of a program of undergraduate education—

(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this title); and

(II) if such student is enrolled in a program of undergraduate education which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as the length of such program measured in semester, trimester, quarter, or clock hours bears to one academic year;


(ii) in the case of a student at an eligible institution who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate education—

(I) $4,500; or

(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year;


(iii) in the case of a student at an eligible institution who has successfully completed the first and second years of a program of undergraduate education but has not successfully completed the remainder of such program—

(I) $5,500; or

(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; and


(iv) in the case of a graduate or professional student (as defined in regulations of the Secretary) at an eligible institution, $8,500.


(B) The annual insurable limits contained in subparagraph (A) shall not apply in cases where the Secretary determines, pursuant to regulations, that a higher amount is warranted in order to carry out the purpose of this part with respect to students engaged in specialized training requiring exceptionally high costs of education. The annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any year in excess of the annual limit.

(C) For the purpose of subparagraph (A), the number of years that a student has completed in a program of undergraduate education shall include any prior enrollment in an eligible program of undergraduate education for which the student was awarded an associate or baccalaureate degree, if such degree is required by the institution for admission to the program in which the student is enrolled.

(2) Aggregate limits

(A) The aggregate insured unpaid principal amount for all such insured loans made to any student shall not at any time exceed—

(i) $23,000, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under section 1078–1 1 or 1078–2 of this title; and

(ii) $65,500, in the case of any graduate or professional student (as defined by regulations of the Secretary) and (I) including any loans which are insured by the Secretary under this section, or by a guaranty agency, made to such student before the student became a graduate or professional student),2 but (II) excluding loans made under section 1078–1 1 or 1078–2 of this title,


except that the Secretary may increase the limit applicable to students who are pursuing programs which the Secretary determines are exceptionally expensive.

(B) The Secretary may increase the aggregate insurable limit applicable to students who are pursuing programs which the Secretary determines are exceptionally expensive.

(b) Level of insurance coverage based on default rate

(1) Reduction for defaults in excess of 5 or 9 percent

(A) Except as provided in subparagraph (B), the insurance liability on any loan insured by the Secretary under this part shall be 100 percent of the unpaid balance of the principal amount of the loan plus interest, except that—

(i) if, for any fiscal year, the total amount of payments under section 1080 of this title by the Secretary to any eligible lender as described in section 1085(d)(1)(D) of this title exceeds 5 percent of the sum of the loans made by such lender which are insured by the Secretary and which were in repayment at the end of the preceding fiscal year, the insurance liability under this subsection for that portion of such excess which represents loans insured after the applicable date with respect to such loans, as determined under subparagraph (C), shall be equal to 90 percent of the amount of such portion; or

(ii) if, for any fiscal year, the total amount of such payments to such a lender exceeds 9 percent of such sum, the insurance liability under this subsection for that portion of such excess which represents loans insured after the applicable date with respect to such loans, as determined under subparagraph (C), shall be equal to 80 percent of the amount of such portion.


(B) Notwithstanding subparagraph (A), the provisions of clauses (i) and (ii) of such subparagraph shall not apply to an eligible lender as described in section 1085(d)(1)(D) of this title for the fiscal year in which such lender begins to carry on a loan program insured by the Secretary, or for any of the 4 succeeding fiscal years.

(C) The applicable date with respect to a loan made by an eligible lender as described in section 1085(d)(1)(D) of this title shall be—

(i) the 90th day after the adjournment of the next regular session of the appropriate State legislature which convenes after October 12, 1976, or

(ii) if the primary source of lending capital for such lender is derived from the sale of bonds, and the constitution of the appropriate State prohibits a pledge of such State's credit as security against such bonds, the day which is one year after such 90th day.

(2) Computation of amounts in repayment

For the purpose of this subsection, the sum of the loans made by a lender which are insured by the Secretary and which are in repayment shall be the original principal amount of loans made by such lender which are insured by the Secretary reduced by—

(A) the amount the Secretary has been required to pay to discharge his or her insurance obligations under this part;

(B) the original principal amount of loans insured by the Secretary which have been fully repaid;

(C) the original principal amount insured on those loans for which payment of first installment of principal has not become due pursuant to section 1077(a)(2)(B) of this title or such first installment need not be paid pursuant to section 1077(a)(2)(C) of this title; and

(D) the original principal amount of loans repaid by the Secretary under section 1087 of this title.

(3) Payments to assignees

For the purpose of this subsection, payments by the Secretary under section 1080 of this title to an assignee of the lender with respect to a loan shall be deemed payments made to such lender.

(4) Pledge of full faith and credit

The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under the provisions of section 1080 or 1087 of this title.

(Pub. L. 89–329, title IV, §425, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1359; amended Pub. L. 100–50, §10(a), June 3, 1987, 101 Stat. 341; Pub. L. 102–325, title IV, §413, July 23, 1992, 106 Stat. 512; Pub. L. 103–208, §2(c)(2), (3), Dec. 20, 1993, 107 Stat. 2460, 2461; Pub. L. 105–244, title IV, §415, Oct. 7, 1998, 112 Stat. 1679; Pub. L. 109–171, title VIII, §8005(a), Feb. 8, 2006, 120 Stat. 158.)

References in Text

Section 1078–1 of this title, referred to in subsec. (a)(2)(A), was repealed by Pub. L. 103–66, title IV, §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, §418, Oct. 7, 1998, 112 Stat. 1691.

Prior Provisions

A prior section 1075, Pub. L. 89–329, title IV, §425, Nov. 8, 1965, 79 Stat. 1238; Pub. L. 90–575, title I, §§116(b)(1), 120(a)(2), Oct. 16, 1968, 82 Stat. 1023, 1027; Pub. L. 92–318, title I, §§132A(a), 132B(a), June 23, 1972, 86 Stat. 261, 262; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2104; Pub. L. 95–43, §1(a)(15)–(17), June 15, 1977, 91 Stat. 214; Pub. L. 95–566, §5(b)(2), Nov. 1, 1978, 92 Stat. 2403; Pub. L. 96–374, title IV, §412(a), (b), (f), title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1416, 1417, 1503; Pub. L. 97–35, title V, §535(a), (b), Aug. 13, 1981, 95 Stat. 455; Pub. L. 99–272, title XVI, §16013(e)(1), Apr. 7, 1986, 100 Stat. 341, limited Federal loan insurance, prior to the general revision of this part by Pub. L. 99–498.

Amendments

2006—Subsec. (a)(1)(A)(i)(I). Pub. L. 109–171, §8005(a)(1), substituted "$3,500" for "$2,625".

Subsec. (a)(1)(A)(ii)(I). Pub. L. 109–171, §8005(a)(2), substituted "$4,500" for "$3,500".

1998—Subsec. (a)(1)(A)(i)(I). Pub. L. 105–244, §415(1)(A), inserted "and" after semicolon.

Subsec. (a)(1)(A)(i)(II), (III). Pub. L. 105–244, §415(1)(B), added subcl. (II) and struck out former subcls. (II) and (III) which read as follows:

"(II) $1,750, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(III) $875, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year;".

Subsec. (a)(1)(A)(iii)(II). Pub. L. 105–244, §415(2), inserted "and" after semicolon at end.

1993—Subsec. (a)(1)(A)(ii), (iii). Pub. L. 103–208, §2(c)(2)(A), added cls. (ii) and (iii) and struck out former cls. (ii) and (iii) which read as follows:

"(ii) the case of a student who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate study—

"(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this title);

"(II) $2,325, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(III) $1,175, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year;

"(iii) in the case of a student at an eligible institution who has successfully completed such first and second year but has not successfully completed the remainder of a program of undergraduate study—

"(I) $5,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this title);

"(II) $3,675, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(III) $1,825, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; and".

Subsec. (a)(1)(A)(iv). Pub. L. 103–208, §2(c)(2)(B), substituted a period for semicolon at end.

Subsec. (a)(1)(C). Pub. L. 103–208, §2(c)(3), added subpar. (C).

1992—Subsec. (a)(1)(A). Pub. L. 102–325, §413(1), added cls. (i) to (iv) and struck out former cls. (i) to (iii) which read as follows:

"(i) $2,625, in the case of a student who has not successfully completed the first and second year of a program of undergraduate education;

"(ii) $4,000, in the case of a student who has successfully completed such first and second year but who has not successfully completed the remainder of a program of undergraduate education; or

"(iii) $7,500, in the case of a graduate or professional student (as defined in regulations of the Secretary)."

Subsec. (a)(2)(A). Pub. L. 102–325, §413(2), added cls. (i) and (ii) and concluding provision and struck out former cls. (i) and (ii) which read as follows:

"(i) $17,250, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under section 1078–1 or 1078–2 of this title; and

"(ii) $54,750, in the case of any graduate or professional student (as defined by regulations of the Secretary and including any loans which are insured by the Secretary under this part, or by a guaranty agency, made to such person before he or she became a graduate or professional student), excluding loans made under section 1078–1 or 1078–2 of this title."

1987—Subsec. (a)(2)(A)(i). Pub. L. 100–50, §10(a)(1), inserted ", excluding loans made under section 1078–1 or 1078–2 of this title" after "undergraduate education".

Subsec. (a)(2)(A)(ii). Pub. L. 100–50, §10(a)(2), inserted ", excluding loans made under section 1078–1 or 1078–2 of this title" after "graduate or professional student)".

Effective Date of 2006 Amendment

Pub. L. 109–171, title VIII, §8005(e), Feb. 8, 2006, 120 Stat. 159, provided that: "The amendments made by subsections (a), (b), and (d) [amending this section and sections 1078 and 1078–8 of this title] shall be effective July 1, 2007."

Effective Date of 1998 Amendment

Amendment by 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 section 2(c)(2) of Pub. L. 103–208 effective on and after July 1, 1994 and amendment by section 2(c)(3) of Pub. L. 103–208 effective on and after Dec. 20, 1993, see section 5(b)(2), (6) of Pub. L. 103–208 set out as a note under section 1051 of this title.

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–325 effective July 23, 1992, with changes made in subsec. (a), relating to annual and aggregate loan limits, applicable with respect to loans for which first disbursement is made on or after July 1, 1993, except that changes made in subsec. (a)(1)(A)(i) applicable with respect to loans for which first disbursement is made on or after Oct. 1, 1992, and except that changes made in subsec. (a)(1)(A)(iv) applicable with respect to loans to cover costs of instruction for periods of enrollment beginning on or after Oct. 1, 1993, see section 432 of Pub. L. 102–325, 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.

Effective Date

Section effective Oct. 17, 1986, except that subsec. (a) of this section applicable only to loans disbursed on or after Jan. 1, 1987, or made to cover the costs of instruction for periods of enrollment beginning on or after Jan. 1, 1987, see section 402(b) of Pub. L. 99–498, set out as a note under section 1071 of this title.

1 See References in Text note below.

2 So in original. There is no opening parenthesis.

§1076. Sources of funds

Loans made by eligible lenders in accordance with this part shall be insurable by the Secretary whether made from funds fully owned by the lender or from funds held by the lender in a trust or similar capacity and available for such loans.

(Pub. L. 89–329, title IV, §426, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1361.)

Prior Provisions

A prior section 1076, Pub. L. 89–329, title IV, §426, Nov. 8, 1965, 79 Stat. 1238; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2106; Pub. L. 96–374, title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1503, related to insurability of loans made from funds owned by lender or held by lender in trust, prior to the general revision of this part by Pub. L. 99–498.

§1077. Eligibility of student borrowers and terms of federally insured student loans

(a) List of requirements

Except as provided in section 1078–3 of this title, a loan by an eligible lender shall be insurable by the Secretary under the provisions of this part only if—

(1) made to a student who (A) is an eligible student under section 1091 of this title, (B) has agreed to notify promptly the holder of the loan concerning any change of address, and (C) is carrying at least one-half the normal full-time academic workload for the course of study the student is pursuing (as determined by the institution); and

(2) evidenced by a note or other written agreement which—

(A) is made without security and without endorsement;

(B) provides for repayment (except as provided in subsection (c)) of the principal amount of the loan in installments over a period of not less than 5 years (unless sooner repaid or unless the student, during the 6 months preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years beginning 6 months after the month in which the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, except—

(i) as provided in subparagraph (C);

(ii) that the note or other written instrument may contain such reasonable provisions relating to repayment in the event of default in the payment of interest or in the payment of the cost of insurance premiums, or other default by the borrower, as may be authorized by regulations of the Secretary in effect at the time the loan is made; and

(iii) that the lender and the student, after the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, may agree to a repayment schedule which begins earlier, or is of shorter duration, than required by this subparagraph, but in the event a borrower has requested and obtained a repayment period of less than 5 years, the borrower may at any time prior to the total repayment of the loan, have the repayment period extended so that the total repayment period is not less than 5 years;


(C) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid, during any period—

(i) during which the borrower—

(I) is pursuing at least a half-time course of study as determined by an eligible institution; or

(II) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for individuals with disabilities approved by the Secretary,


 except that no borrower shall be eligible for a deferment under this clause, or a loan made under this part (other than a loan made under section 1078–2 or 1078–3 of this title), while serving in a medical internship or residency program;

(ii) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment;

(iii) not in excess of 3 years for any reason which the lender determines, in accordance with regulations prescribed by the Secretary under section 1085(o) of this title, has caused or will cause the borrower to have an economic hardship; or

(iv) in which the borrower is receiving treatment for cancer and the 6 months after such period.1


and provides that any such period shall not be included in determining the 10-year period described in subparagraph (B);

(D) provides for interest on the unpaid principal balance of the loan at a yearly rate, not exceeding the applicable maximum rate prescribed in section 1077a of this title, which interest shall be payable in installments over the period of the loan except that, if provided in the note or other written agreement, any interest payable by the student may be deferred until not later than the date upon which repayment of the first installment of principal falls due, in which case interest accrued during that period may be added on that date to the principal;

(E) provides that the lender will not collect or attempt to collect from the borrower any portion of the interest on the note which is payable by the Secretary under this part, and that the lender will enter into such agreements with the Secretary as may be necessary for the purpose of section 1087 of this title;

(F) entitles the student borrower to accelerate without penalty repayment of the whole or any part of the loan;

(G)(i) contains a notice of the system,2 of disclosure of information concerning such loan to consumer reporting agencies 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 consumer reporting agencies;

(H) provides that, no more than 6 months prior to the date on which the borrower's first payment on a loan is due, the lender shall offer the borrower the option of repaying the loan in accordance with a graduated or income-sensitive repayment schedule established by the lender and in accordance with the regulations of the Secretary; and

(I) contains such other terms and conditions, consistent with the provisions of this part and with the regulations issued by the Secretary pursuant to this part, as may be agreed upon by the parties to such loan, including, if agreed upon, a provision requiring the borrower to pay the lender, in addition to principal and interest, amounts equal to the insurance premiums payable by the lender to the Secretary with respect to such loan;


(3) the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except—

(A) that nothing in this subchapter shall be interpreted—

(i) to allow the Secretary to require checks to be made copayable to the institution and the borrower; or

(ii) to prohibit the disbursement of loan proceeds by means other than by check; and


(B) in the case of any student who is studying outside the United States in a program of study abroad that is approved for credit by the home institution at which such student is enrolled, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney; and


(4) the funds borrowed by a student are disbursed in accordance with section 1078–7 of this title.

(b) Special rules for multiple disbursement

For the purpose of subsection (a)(4)—

(1) all loans issued for the same period of enrollment shall be considered as a single loan; and

(2) the requirements of such subsection shall not apply in the case of a loan made under section 1078–2 or 1078–3 of this title, or made to a student to cover the cost of attendance at an eligible institution outside the United States.

(c) Special repayment rules

Except as provided in subsection (a)(2)(H), the total of the payments by a borrower during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not, unless the borrower and the lender otherwise agree, be less than $600 or the balance of all such loans (together with interest thereon), whichever amount is less (but in no instance less than the amount of interest due and payable).

(d) Borrower information

The lender shall obtain the borrower's driver's license number, if any, at the time of application for the loan.

(Pub. L. 89–329, title IV, §427, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1361; amended Pub. L. 100–50, §10(b), (c), June 3, 1987, 101 Stat. 341; Pub. L. 100–369, §§5(b)(1), 7(c), 11(a), July 18, 1988, 102 Stat. 836–838; Pub. L. 101–239, title II, §§2002(a)(1), 2004(b)(2), Dec. 19, 1989, 103 Stat. 2111, 2116; Pub. L. 102–164, title VI, §§601(a), 602(a), Nov. 15, 1991, 105 Stat. 1065, 1066; Pub. L. 102–325, title IV, §414, July 23, 1992, 106 Stat. 513; Pub. L. 103–208, §2(c)(4), Dec. 20, 1993, 107 Stat. 2461; Pub. L. 110–315, title IV, §432(b)(1), Aug. 14, 2008, 122 Stat. 3246; Pub. L. 115–245, div. B, title III, §309(b), Sept. 28, 2018, 132 Stat. 3106.)

Prior Provisions

A prior section 1077, Pub. L. 89–329, title IV, §427, Nov. 8, 1965, 79 Stat. 1238; Pub. L. 89–794, title XI, §1101(b)(1), Nov. 8, 1966, 80 Stat. 1476; Pub. L. 90–460, §2(a)(1), Aug. 3, 1968, 82 Stat. 635; Pub. L. 90–575, title I, §§113(b)(2), 116(b)(2), 117(c), 120(c)(2), Oct. 16, 1968, 82 Stat. 1021, 1023, 1026, 1027; Pub. L. 92–318, title I, §§132B(b), 132C(c), June 23, 1972, 86 Stat. 262, 263; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2106; Pub. L. 95–43, §1(a)(9), (18), June 15, 1977, 91 Stat. 213, 214; Pub. L. 95–566, §5(a)(1), Nov. 1, 1978, 92 Stat. 2403; Pub. L. 96–374, title IV, §§413(a), (c), 415(a)(2), (b)(1), 416(a)(2), 423(a)(1), title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1417–1421, 1432, 1503; Pub. L. 97–35, title V, §537(b)(1), (d)(2), (e)(1), Aug. 13, 1981, 95 Stat. 456, 457; Pub. L. 98–79, §10[(a)], Aug. 15, 1983, 97 Stat. 484; Pub. L. 99–272, title XVI, §§16012(a), 16013(b), 16017(b)(1), Apr. 7, 1986, 100 Stat. 339, 340, 347, set out conditions for Federal loan insurance, prior to the general revision of this part by Pub. L. 99–498.

Amendments

2018—Subsec. (a)(2)(C)(iv). Pub. L. 115–245 added cl. (iv).

2008—Subsec. (a)(2)(G)(i). Pub. L. 110–315, §432(b)(1)(A), substituted "consumer reporting agencies" for "credit bureau organizations".

Subsec. (a)(2)(G)(ii). Pub. L. 110–315, §432(b)(1)(B), substituted "consumer reporting agencies" for "organizations".

1993—Subsec. (a)(2)(C)(i). Pub. L. 103–208 inserted "section" before "1078–2 or 1078–3".

1992—Subsec. (a)(2)(A). Pub. L. 102–325, §414(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "is made without security and without endorsement, except that prior to making a loan insurable by the Secretary under this part a lender shall—

"(i) obtain a credit report, from at least one national credit bureau organization, with respect to a loan applicant who will be at least 21 years of age as of July 1 of the award year for which assistance is being sought, for which the lender may charge the applicant an amount not to exceed the lesser of $25 or the actual cost of obtaining the credit report; and

"(ii) require an applicant of the age specified in clause (i) who, in the judgment of the lender in accordance with the regulations of the Secretary, has an adverse credit history, to obtain a credit worthy cosigner in order to obtain the loan, provided that, for purposes of this clause, an insufficient or nonexistent credit history may not be considered to be an adverse credit history;".

Subsec. (a)(2)(C). Pub. L. 102–325, §414(b), amended subpar. (C) generally, revising and restating as cls. (i) to (iii) provisions formerly contained in cls. (i) to (xi).

Subsec. (a)(2)(G) to (I). Pub. L. 102–325, §414(c)(1), struck out "and" at end of subpar. (G), added subpar. (H), and redesignated former subpar. (H) as (I).

Subsec. (a)(3). Pub. L. 102–325, §414(d), amended par. (3) generally. Prior to amendment, par. (3) read as follows: "the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except nothing in this subchapter shall be interpreted to allow the Secretary to require checks to be made co-payable to the institution and the borrower or to prohibit the disbursement of loan proceeds by means other than by check; and".

Subsec. (c). Pub. L. 102–325, §414(c)(2), (e), substituted "Special repayment rules" for "Minimum repayment rate" in heading and in text "Except as provided in subsection (a)(2)(H), the total" for "The total" and "(but in no instance less than the amount of interest due and payable)" for ", except that in the case of a husband and wife, both of whom have such loans outstanding, the total of the combined payments for such a couple during any year shall not be less than $600 or the balance of all such loans, whichever is less".

1991—Subsec. (a)(2)(A). Pub. L. 102–164, §601(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "is made without security and without endorsement, except that if the borrower is a minor and such note or other written agreement executed by the borrower would not, under the applicable law, create a binding obligation, endorsement may be required;".

Subsec. (d). Pub. L. 102–164, §602(a), added subsec. (d).

1989—Subsec. (a)(2)(C)(i). Pub. L. 101–239, §2002(a)(1), inserted before semicolon at end ", except that no borrower shall be eligible for a deferment under this clause, or a loan made under this part (other than a loan made under section 1078–2 or 1078–3 of this title), while serving in a medical internship or residency program".

Subsec. (a)(4). Pub. L. 101–239, §2004(b)(2), amended par. (4) generally. Prior to amendment, par. (4) read as follows: "in the case of any loan made for any period of enrollment that ends more than 180 days (or 6 months) after the date disbursement is scheduled to occur, and for an amount of $1,000 or more, the proceeds of the loan will, subject to subsection (b) of this section, be disbursed directly by the lender in two or more installments, none of which exceeds one-half of the loan, with the second installment being disbursed after not less than one-third of such period (except as necessary to permit the second installment to be disbursed at the beginning of the second semester, quarter, or similar division of such period of enrollment)."

1988—Subsec. (a)(2)(C)(v). Pub. L. 100–369, §7(c), substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954", which for purposes of codification was translated as "title 26" thus requiring no change in text.

Subsec. (a)(2)(C)(vii). Pub. L. 100–369, §11(a), inserted "after January 1, 1986," after "service".

Subsec. (b)(2). Pub. L. 100–369, §5(b)(1), substituted "section 1078–2 or 1078–3" for "section 1078–1, 1078–2, or 1078–3".

1987—Subsec. (a)(2)(C)(vi). Pub. L. 100–50, §10(b)(1), inserted "nonprofit" before "private".

Subsec. (a)(2)(C)(vii). Pub. L. 100–50, §10(b)(2), inserted "or serving in an internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training" before semicolon at end.

Subsec. (a)(4). Pub. L. 100–50, §10(c), substituted "$1,000 or more" for "more than $1,000".

Effective Date of 2018 Amendment

Pub. L. 115–245, div. B, title III, §309(f), Sept. 28, 2018, 132 Stat. 3106, provided that: "The amendments made by this Act [probably means "this section", amending this section and sections 1078, 1078–8, 1087e, and 1087dd of this title] shall apply with respect to loans—

"(1) made on or after the date of the enactment of this Act [Sept. 28, 2018]; or

"(2) in repayment on the date of the enactment of this Act."

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 1003 of this title.

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–325 effective July 23, 1992, except that changes made in subsec. (a)(2)(C), relating to deferments, applicable with respect to loans for which first disbursement is made on or after July 1, 1993, to an individual who is a new borrower on date such individual applies for a loan, and except that changes made in subsec. (a)(2)(H), relating to offering graduated or income sensitive repayment options, applicable with respect to loans for which first disbursement is made on or after July 1, 1993, to an individual who is a new borrower on date such individual applies for a loan, see section 432 of Pub. L. 102–325, set out as a note under section 1078 of this title.

Effective Date of 1989 Amendment

Pub. L. 101–239, title II, §2002(a)(4), Dec. 19, 1989, 103 Stat. 2111, provided that: "The amendments made by this subsection [amending this section and sections 1078 and 1087dd of this title] shall apply to any loan made, insured, or guaranteed under part B or part E of title IV of the Higher Education Act of 1965 [20 U.S.C. 1071 et seq., 1087aa et seq.], including a loan made before the enactment of this Act [Dec. 19, 1989], and shall take effect on January 1, 1990, except that such amendments shall not apply with respect to any portion of a period of deferment granted to a borrower under section 427(a)(2)(C)(i), 428(b)(1)(M)(i), or 464(c)(2)(A)(i) of the Higher Education Act of 1965 [sections 1077(a)(2)(C)(i), 1078(b)(1)(M)(i), 1087dd(c)(2)(A)(i) of this title] for service in a medical internship or residency program that is completed prior to the effective date of this section [Dec. 19, 1989]."

Pub. L. 101–239, title II, §2004(c), Dec. 19, 1989, 103 Stat. 2116, provided that: "The amendments made by this section [enacting section 1078–7 of this title and amending this section and section 1078 of this title] shall apply with respect to loans made to cover the cost of instruction for periods of enrollment beginning on or after January 1, 1990."

Effective Date of 1988 Amendment

Pub. L. 100–369, §11(b), July 18, 1988, 102 Stat. 838, provided that: "The amendments made by subsection (a) [amending this section and section 1078 of this title] and section 10(b) of the Higher Education Technical Amendments Act of 1987 [section 10(b) of Pub. L. 100–50, amending this section and section 1078 of this title] shall apply with respect to loans made, insured or guaranteed under part B of the Higher Education Act of 1965 [probably means part B of title IV of Pub. L. 89–329 which is classified to this part], on, before, or after the date of enactment of the Higher Education Technical Amendments Act of 1987 [June 3, 1987]."

Amendment by section 5(b)(1) of Pub. L. 100–369 effective with respect to loans made on or after Oct. 1, 1988, and amendment by section 7(c) of Pub. L. 100–369 effective July 18, 1988, see section 13(b) of Pub. L. 100–369, set out as a note under section 1091 of this title.

Effective Date of 1987 Amendment

Amendment by section 10(b) of Pub. L. 100–50 applicable with respect to loans made, insured or guaranteed under this part on, before, or after June 3, 1987, see section 11(b) of Pub. L. 100–369, set out as an Effective Date of 1988 Amendment note above.

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 effective Oct. 17, 1986, except that subsec. (a)(2)(C) (other than cls. (viii), (ix), and (x) thereof) of this section shall apply only to loans to new borrowers made to cover the costs of instruction for periods of enrollment beginning on or after July 1, 1987, or disbursed on or after July 1, 1987, see section 402(b) of Pub. L. 99–498, set out as a note under section 1071 of this title.

1 So in original. The period probably should be a semicolon.

2 So in original. The comma probably should not appear.

§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) 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) 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.

(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 1078–1,1 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—

(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), but subject to subsection (h), 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), 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), 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), 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), 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, 2006

(1) In general

Notwithstanding subsection (h) 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, 2006, 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), 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, 2006, 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), 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, 2006, 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, 2006, the applicable rate of interest shall be at an annual rate on the unpaid principal balance of the loan that is equal to the lesser of—

(A) the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of 1 percent; or

(B) 8.25 percent.

(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) Interest rates for new loans on or after July 1, 2006, and before July 1, 2010

(1) In general

Notwithstanding subsection (h), with respect to any loan made, insured, or guaranteed under this part (other than a loan made pursuant to section 1078–2 or 1078–3 of this title) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of interest shall be 6.8 percent on the unpaid principal balance of the loan.

(2) PLUS loans

Notwithstanding subsection (h), with respect to any loan under section 1078–2 of this title for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of interest shall be 8.5 percent on the unpaid principal balance of the loan.

(3) 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 July 1, 2006, and that was disbursed before July 1, 2010, 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.

(4) Reduced rates for undergraduate subsidized loans

Notwithstanding subsection (h) and paragraph (1) of this subsection, with respect to any loan to an undergraduate student made, insured, or guaranteed under this part (other than a loan made pursuant to section 1078–2, 1078–3, or 1078–8 of this title) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of interest shall be as follows:

(A) For a loan for which the first disbursement is made on or after July 1, 2006, and before July 1, 2008, 6.8 percent on the unpaid principal balance of the loan.

(B) For a loan for which the first disbursement is made on or after July 1, 2008, and before July 1, 2009, 6.0 percent on the unpaid principal balance of the loan.

(C) For a loan for which the first disbursement is made on or after July 1, 2009, and before July 1, 2010, 5.6 percent on the unpaid principal balance of the loan.

(m) 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.

(n) 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, §427A, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1364; amended Pub. L. 100–50, §10(d)(1), June 3, 1987, 101 Stat. 342; Pub. L. 102–325, title IV, §415, July 23, 1992, 106 Stat. 514; Pub. L. 103–66, title IV, §4101, Aug. 10, 1993, 107 Stat. 364; Pub. L. 103–208, §2(c)(5)–(10), Dec. 20, 1993, 107 Stat. 2461; Pub. L. 105–178, title VIII, §8301(a)(1), June 9, 1998, 112 Stat. 496; Pub. L. 105–244, title IV, §416(a)(1), Oct. 7, 1998, 112 Stat. 1679; Pub. L. 106–554, §1(a)(1) [title III, §318(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A-49; Pub. L. 107–139, §1(a)(1), (c), Feb. 8, 2002, 116 Stat. 8, 9; Pub. L. 109–171, title VIII, §8006(a), Feb. 8, 2006, 120 Stat. 159; Pub. L. 110–84, title II, §201(a)(1), Sept. 27, 2007, 121 Stat. 790; Pub. L. 111–152, title II, §2203, Mar. 30, 2010, 124 Stat. 1074.)

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, §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, §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, §427A, as added Pub. L. 96–374, title IV, §415(a)(1), Oct. 3, 1980, 94 Stat. 1419; amended Pub. L. 97–35, title V, §534(a)(1), Aug. 13, 1981, 95 Stat. 454; Pub. L. 98–79, §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

2010—Subsec. (l). Pub. L. 111–152, §2203(1), inserted "and before July 1, 2010" in heading.

Subsec. (l)(1), (2). Pub. L. 111–152, §2203(2), (3), inserted "and before July 1, 2010," after "July 1, 2006,".

Subsec. (l)(3). Pub. L. 111–152, §2203(4), inserted "and that was disbursed before July 1, 2010," after "July 1, 2006,".

Subsec. (l)(4). Pub. L. 111–152, §2203(5)(A), substituted "July 1, 2010" for "July 1, 2012" in introductory provisions.

Subsec. (l)(4)(D), (E). Pub. L. 111–152, §2203(5)(B), struck out subpars. (D) and (E) which read as follows:

"(D) For a loan for which the first disbursement is made on or after July 1, 2010, and before July 1, 2011, 4.5 percent on the unpaid principal balance of the loan.

"(E) For a loan for which the first disbursement is made on or after July 1, 2011, and before July 1, 2012, 3.4 percent on the unpaid principal balance of the loan."

2007—Subsec. (l)(4). Pub. L. 110–84 added par. (4).

2006—Subsec. (l)(2). Pub. L. 109–171 substituted "8.5 percent" for "7.9 percent".

2002—Subsec. (k). Pub. L. 107–139, §1(c), substituted "2006" for "2003" in heading and "July 1, 2006," for "July 1, 2003," wherever appearing in text.

Subsecs. (l) to (n). Pub. L. 107–139, §1(a)(1), added subsec. (l) and redesignated former subsecs. (l) and (m) as (m) and (n), respectively.

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, §8301(a)(1)(B), added subsec. (j). Former subsec. (j) redesignated (k).

Subsec. (k). Pub. L. 105–244, §416(a)(1)(B), added subsec. (k). Former subsec. (k) redesignated (l).

Pub. L. 105–178, §8301(a)(1)(A), redesignated subsec. (j) as (k). Former subsec. (k) redesignated (l).

Subsec. (l). Pub. L. 105–244, §416(a)(1)(A), redesignated subsec. (k) as (l). Former subsec. (l) redesignated (m).

Pub. L. 105–178, §8301(a)(1)(A), redesignated subsec. (k) as (l).

Subsec. (m). Pub. L. 105–244, §416(a)(1)(A), redesignated subsec. (l) as (m).

1993—Subsec. (c)(4)(E). Pub. L. 103–66, §4101(1), added subpar. (E).

Subsec. (e)(1). Pub. L. 103–208, §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, §4101(3), added subsecs. (f) to (h). Former subsecs. (f) to (h) redesignated (i) to (k), respectively.

Subsec. (i). Pub. L. 103–66, §4101(2), redesignated subsec. (f) as (i).

Subsec. (i)(1)(B). Pub. L. 103–208, §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, §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, §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, §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, §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, §2(c)(10), added par. (7). See Codification note above.

Subsecs. (j), (k). Pub. L. 103–66, §4101(2), redesignated subsecs. (g) and (h) as (j) and (k), respectively.

1992—Subsec. (c)(4)(D). Pub. L. 102–325, §415(a), added subpar. (D).

Subsec. (e). Pub. L. 102–325, §415(c)(2), added subsec. (e). Former subsec. (e) redesignated (f).

Pub. L. 102–325, §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, §415(c)(1), redesignated subsecs. (e) to (g) as (f) to (h), respectively.

1987—Subsec. (c)(4)(A). Pub. L. 100–50, §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, §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 2007 Amendment

Amendment by Pub. L. 110–84 effective Oct. 1, 2007, see section 1(c) of Pub. L. 110–84, set out as a note under section 1070a of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 1998 Amendment

Pub. L. 105–244, title IV, §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.

1 See References in Text note below.

§1078. Federal payments to reduce student interest costs

(a) Federal interest subsidies

(1) Types of loans that qualify

Each student who has received a loan for study at an eligible institution for which the first disbursement is made before July 1, 2010, and—

(A) which is insured by the Secretary under this part; or

(B) which is insured under a program of a State or of a nonprofit private institution or organization which was contracted for, and paid to the student, within the period specified in paragraph (5), and which—

(i) in the case of a loan insured prior to July 1, 1967, was made by an eligible lender and is insured under a program which meets the requirements of subparagraph (E) of subsection (b)(1) and provides that repayment of such loan shall be in installments beginning not earlier than 60 days after the student ceases to pursue a course of study (as described in subparagraph (D) of subsection (b)(1)) at an eligible institution, or

(ii) in the case of a loan insured after June 30, 1967, was made by an eligible lender and is insured under a program covered by an agreement made pursuant to subsection (b),


shall be entitled to have paid on his or her behalf and for his or her account to the holder of the loan a portion of the interest on such loan under circumstances described in paragraph (2).

(2) Additional requirements to receive subsidy

(A) Each student qualifying for a portion of an interest payment under paragraph (1) shall—

(i) have provided to the lender a statement from the eligible institution, at which the student has been accepted for enrollment, or at which the student is in attendance, which—

(I) sets forth the loan amount for which the student shows financial need; and

(II) sets forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 1078–7 of this title;


(ii) meet the requirements of subparagraph (B); and

(iii) have provided to the lender at the time of application for a loan made, insured, or guaranteed under this part, the student's driver's number, if any.


(B) For the purpose of clause (ii) of subparagraph (A), a student shall qualify for a portion of an interest payment under paragraph (1) if the eligible institution has determined and documented the student's amount of need for a loan based on the student's estimated cost of attendance, estimated financial assistance, and, for the purpose of an interest payment pursuant to this section, expected family contribution (as determined under part F), subject to the provisions of subparagraph (D).

(C) For the purpose of this paragraph—

(i) a student's cost of attendance shall be determined under section 1087ll of this title;

(ii) a student's estimated financial assistance means, for the period for which the loan is sought—

(I) the amount of assistance such student will receive under subpart 1 of part A of this subchapter (as determined in accordance with section 1091(b) of this title), subpart 3 of part A of this subchapter, and parts C and E; plus

(II) other scholarship, grant, or loan assistance, but excluding—

(aa) any national service education award or post-service benefit under title I of the National and Community Service Act of 1990 [42 U.S.C. 12511 et seq.]; and

(bb) any veterans' education benefits as defined in section 1087vv(c) of this title; and


(iii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F.


(D) An eligible institution may not, in carrying out the provisions of subparagraphs (A) and (B) of this paragraph, provide a statement which certifies the eligibility of any student to receive any loan under this part in excess of the maximum amount applicable to such loan.

(E) For the purpose of subparagraphs (B) and (C) of this paragraph, any loan obtained by a student under section 1078–1 1 or 1078–8 of this title or a parent under section 1078–2 of this title or under any State-sponsored or private loan program for an academic year for which the determination is made may be used to offset the expected family contribution of the student for that year.

(3) Amount of interest subsidy

(A)(i) Subject to section 1087–1(c) of this title, the portion of the interest on a loan which a student is entitled to have paid, on behalf of and for the account of the student, to the holder of the loan pursuant to paragraph (1) of this subsection shall be equal to the total amount of the interest on the unpaid principal amount of the loan—

(I) which accrues prior to the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution), or

(II) which accrues during a period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in subsection (b)(1)(M) of this section or in section 1077(a)(2)(C) of this title.


(ii) Such portion of the interest on a loan shall not exceed, for any period, the amount of the interest on that loan which is payable by the student after taking into consideration the amount of any interest on that loan which the student is entitled to have paid on his or her behalf for that period under any State or private loan insurance program.

(iii) The holder of a loan with respect to which payments are required to be made under this section shall be deemed to have a contractual right, as against the United States, to receive from the Secretary the portion of interest which has been so determined without administrative delay after the receipt by the Secretary of an accurate and complete request for payment pursuant to paragraph (4).

(iv) The Secretary shall pay this portion of the interest to the holder of the loan on behalf of and for the account of the borrower at such times as may be specified in regulations in force when the applicable agreement entered into pursuant to subsection (b) was made, or, if the loan was made by a State or is insured under a program which is not covered by such an agreement, at such times as may be specified in regulations in force at the time the loan was paid to the student.

(v) A lender may not receive interest on a loan for any period that precedes the date that is—

(I) in the case of a loan disbursed by check, 10 days before the first disbursement of the loan;

(II) in the case of a loan disbursed by electronic funds transfer, 3 days before the first disbursement of the loan; or

(III) in the case of a loan disbursed through an escrow agent, 3 days before the first disbursement of the loan.


(B) If—

(i) a State student loan insurance program is covered by an agreement under subsection (b),

(ii) a statute of such State limits the interest rate on loans insured by such program to a rate which is less than the applicable interest rate under this part, and

(iii) the Secretary determines that subsection (d) does not make such statutory limitation inapplicable and that such statutory limitation threatens to impede the carrying out of the purpose of this part,


then the Secretary may pay an administrative cost allowance to the holder of each loan which is insured under such program and which is made during the period beginning on the 60th day after October 16, 1968, and ending 120 days after the adjournment of such State's first regular legislative session which adjourns after January 1, 1969. Such administrative cost allowance shall be paid over the term of the loan in an amount per year (determined by the Secretary) which shall not exceed 1 percent of the unpaid principal balance of the loan.

(4) Submission of statements by holders on amount of payment

Each holder of a loan with respect to which payments of interest are required to be made by the Secretary shall submit to the Secretary, at such time or times and in such manner as the Secretary may prescribe, statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the Secretary to determine the amount of the payment which he must make with respect to that loan.

(5) Duration of authority to make interest subsidized loans

The period referred to in subparagraph (B) of paragraph (1) of this subsection shall begin on November 8, 1965, and end at the close of June 30, 2010.

(6) Assessment of borrower's financial condition not prohibited or required

Nothing in this chapter or any other Act shall be construed to prohibit or require, unless otherwise specifically provided by law, a lender to evaluate the total financial situation of a student making application for a loan under this part, or to counsel a student with respect to any such loan, or to make a decision based on such evaluation and counseling with respect to the dollar amount of any such loan.

(7) Loans that have not been consummated

Lenders may not charge interest or receive interest subsidies or special allowance payments for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been completed.

(b) Insurance program agreements to qualify loans for interest subsidies

(1) Requirements of insurance program

Any State or any nonprofit private institution or organization may enter into an agreement with the Secretary for the purpose of entitling students who receive loans which are insured under a student loan insurance program of that State, institution, or organization to have made on their behalf the payments provided for in subsection (a) if the Secretary determines that the student loan insurance program—

(A) authorizes the insurance in any academic year, as defined in section 1088(a)(2) of this title, or its equivalent (as determined under regulations of the Secretary) for any student who is carrying at an eligible institution or in a program of study abroad approved for credit by the eligible home institution at which such student is enrolled at least one-half the normal full-time academic workload (as determined by the institution) in any amount up to a maximum of—

(i) in the case of a student at an eligible institution who has not successfully completed the first year of a program of undergraduate education—

(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length; and

(II) if such student is enrolled in a program of undergraduate education which is less than 1 academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as the length of such program measured in semester, trimester, quarter, or clock hours bears to 1 academic year;


(ii) in the case of a student at an eligible institution who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate education—

(I) $4,500; or

(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year;


(iii) in the case of a student at an eligible institution who has successfully completed the first and second years of a program of undergraduate education but has not successfully completed the remainder of such program—

(I) $5,500; or

(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year;


(iv) in the case of a student who has received an associate or baccalaureate degree and is enrolled in an eligible program for which the institution requires such degree for admission, the number of years that a student has completed in a program of undergraduate education shall, for the purposes of clauses (ii) and (iii), include any prior enrollment in the eligible program of undergraduate education for which the student was awarded such degree;

(v) in the case of a graduate or professional student (as defined in regulations of the Secretary) at an eligible institution, $8,500; and

(vi) in the case of a student enrolled in coursework specified in sections 1091(b)(3)(B) and 1091(b)(4)(B) of this title

(I) $2,625 for coursework necessary for enrollment in an undergraduate degree or certificate program, and, in the case of a student who has obtained a baccalaureate degree, $5,500 for coursework necessary for enrollment in a graduate or professional degree or certification program; and

(II) in the case of a student who has obtained a baccalaureate degree, $5,500 for coursework necessary for a professional credential or certification from a State required for employment as a teacher in an elementary school or secondary school;


except in cases where the Secretary determines, pursuant to regulations, that a higher amount is warranted in order to carry out the purpose of this part with respect to students engaged in specialized training requiring exceptionally high costs of education, but the annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any years in excess of the annual limit;

(B) provides that the aggregate insured unpaid principal amount for all such insured loans made to any student shall be any amount up to a maximum of—

(i) $23,000, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under section 1078–1 1 or 1078–2 of this title; and

(ii) $65,500, in the case of any graduate or professional student (as defined by regulations of the Secretary), and (I) including any loans which are insured by the Secretary under this section, or by a guaranty agency, made to such student before the student became a graduate or professional student, but (II) excluding loans made under section 1078–1 1 or 1078–2 of this title,


except that the Secretary may increase the limit applicable to students who are pursuing programs which the Secretary determines are exceptionally expensive;

(C) authorizes the insurance of loans to any individual student for at least 6 academic years of study or their equivalent (as determined under regulations of the Secretary);

(D) provides that (i) the student borrower shall be entitled to accelerate without penalty the whole or any part of an insured loan, (ii) the student borrower may annually change the selection of a repayment plan under this part, and (iii) the note, or other written evidence of any loan, may contain such reasonable provisions relating to repayment in the event of default by the borrower as may be authorized by regulations of the Secretary in effect at the time such note or written evidence was executed, and shall contain a notice that repayment may, following a default by the borrower, be subject to income contingent repayment in accordance with subsection (m);

(E) subject to subparagraphs (D) and (L), and except as provided by subparagraph (M), provides that—

(i) not more than 6 months prior to the date on which the borrower's first payment is due, the lender shall offer the borrower of a loan made, insured, or guaranteed under this section or section 1078–8 of this title, the option of repaying the loan in accordance with a standard, graduated, income-sensitive, or extended repayment schedule (as described in paragraph (9)) established by the lender in accordance with regulations of the Secretary; and

(ii) repayment of loans shall be in installments in accordance with the repayment plan selected under paragraph (9) and commencing at the beginning of the repayment period determined under paragraph (7);


(F) authorizes interest on the unpaid balance of the loan at a yearly rate not in excess (exclusive of any premium for insurance which may be passed on to the borrower) of the rate required by section 1077a of this title;

(G) insures 98 percent of the unpaid principal of loans insured under the program, except that—

(i) such program shall insure 100 percent of the unpaid principal of loans made with funds advanced pursuant to subsection (j);

(ii) for any loan for which the first disbursement of principal is made on or after July 1, 2006, and before July 1, 2010, the preceding provisions of this subparagraph shall be applied by substituting "97 percent" for "98 percent"; and

(iii) notwithstanding the preceding provisions of this subparagraph, such program shall insure 100 percent of the unpaid principal amount of exempt claims as defined in subsection (c)(1)(G);


(H) provides—

(i) for loans for which the date of guarantee of principal is before July 1, 2006, for the collection of a single insurance premium equal to not more than 1.0 percent of the principal amount of the loan, by deduction proportionately from each installment payment of the proceeds of the loan to the borrower, and ensures that the proceeds of the premium will not be used for incentive payments to lenders; or

(ii) for loans for which the date of guarantee of principal is on or after July 1, 2006, and that are first disbursed before July 1, 2010, for the collection, and the deposit into the Federal Student Loan Reserve Fund under section 1072a of this title of a Federal default fee of an amount equal to 1.0 percent of the principal amount of the loan, which fee shall be collected either by deduction from the proceeds of the loan or by payment from other non-Federal sources, and ensures that the proceeds of the Federal default fee will not be used for incentive payments to lenders;


(I) provides that the benefits of the loan insurance program will not be denied any student who is eligible for interest benefits under subsection (a)(1) and (2);

(J) provides that a student may obtain insurance under the program for a loan for any year of study at an eligible institution;

(K) in the case of a State program, provides that such State program is administered by a single State agency, or by one or more nonprofit private institutions or organizations under supervision of a single State agency;

(L) provides that the total of the payments by borrower—

(i) except as otherwise provided by a repayment plan selected by the borrower under clause (ii), (iii), or (v) of paragraph (9)(A), during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not, unless the borrower and the lender otherwise agree, be less than $600 or the balance of all such loans (together with interest thereon), whichever amount is less (but in no instance less than the amount of interest due and payable, notwithstanding any payment plan under paragraph (9)(A)); and

(ii) for a monthly or other similar payment period with respect to the aggregate of all loans held by the lender may, when the amount of a monthly or other similar payment is not a multiple of $5, be rounded to the next highest whole dollar amount that is a multiple of $5;


(M) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid by the Secretary, during any period—

(i) during which the borrower—

(I) is pursuing at least a half-time course of study as determined by an eligible institution, except that no borrower, notwithstanding the provisions of the promissory note, shall be required to borrow an additional loan under this subchapter in order to be eligible to receive a deferment under this clause; or

(II) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for disabled individuals approved by the Secretary,


 except that no borrower shall be eligible for a deferment under this clause, or loan made under this part (other than a loan made under section 1078–2 or 1078–3 of this title), while serving in a medical internship or residency program;

(ii) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment, except that no borrower who provides evidence of eligibility for unemployment benefits shall be required to provide additional paperwork for a deferment under this clause;

(iii) during which the borrower—

(I) is serving on active duty during a war or other military operation or national emergency; or

(II) is performing qualifying National Guard duty during a war or other military operation or national emergency,


 and for the 180-day period following the demobilization date for the service described in subclause (I) or (II);

(iv) not in excess of 3 years for any reason which the lender determines, in accordance with regulations prescribed by the Secretary under section 1085(o) of this title, has caused or will cause the borrower to have an economic hardship; or

(v) during which the borrower is receiving treatment for cancer and the 6 months after such period;


(N) provides that funds borrowed by a student—

(i) are disbursed to the institution by check or other means that is payable to, and requires the endorsement or other certification by, such student;

(ii) in the case of a student who is studying outside the United States in a program of study abroad that is approved for credit by the home institution at which such student is enrolled, and only after verification of the student's enrollment by the lender or guaranty agency, are, at the request of the student, disbursed directly to the student by the means described in clause (i), unless such student requests that the check be endorsed, or the funds transfer be authorized, pursuant to an authorized power-of-attorney; or

(iii) in the case of a student who is studying outside the United States in a program of study at an eligible foreign institution, are, at the request of the foreign institution, disbursed directly to the student, only after verification of the student's enrollment by the lender or guaranty agency by the means described in clause (i).2


(O) provides that the proceeds of the loans will be disbursed in accordance with the requirements of section 1078–7 of this title;

(P) requires the borrower to notify the institution concerning any change in local address during enrollment and requires the borrower and the institution at which the borrower is in attendance promptly to notify the holder of the loan, directly or through the guaranty agency, concerning (i) any change of permanent address, (ii) when the student ceases to be enrolled on at least a half-time basis, and (iii) any other change in status, when such change in status affects the student's eligibility for the loan;

(Q) provides for the guarantee of loans made to students and parents under sections 1078–1 1 and 1078–2 of this title;

(R) with respect to lenders which are eligible institutions, provides for the insurance of loans by only such institutions as are located within the geographic area served by such guaranty agency;

(S) provides no restrictions with respect to the insurance of loans for students who are otherwise eligible for loans under such program if such a student is accepted for enrollment in or is attending an eligible institution within the State, or if such a student is a legal resident of the State and is accepted for enrollment in or is attending an eligible institution outside that State;

(T) authorizes (i) the limitation of the total number of loans or volume of loans, made under this part to students attending a particular eligible institution during any academic year; and (ii) the limitation, suspension, or termination of the eligibility of an eligible institution if—

(I) such institution is ineligible for the emergency action, limitation, suspension, or termination of eligible institutions under regulations issued by the Secretary or is ineligible pursuant to criteria, rules, or regulations issued under the student loan insurance program which are substantially the same as regulations with respect to emergency action, limitation, suspension, or termination of such eligibility issued by the Secretary;

(II) there is a State constitutional prohibition affecting the eligibility of such an institution;

(III) such institution fails to make timely refunds to students as required by regulations issued by the Secretary or has not satisfied within 30 days of issuance a final judgment obtained by a student seeking such a refund;

(IV) such institution or an owner, director, or officer of such institution is found guilty in any criminal, civil, or administrative proceeding, or such institution or an owner, director, or officer of such institution is found liable in any civil or administrative proceeding, regarding the obtaining, maintenance, or disbursement of State or Federal grant, loan, or work assistance funds; or

(V) such institution or an owner, director, or officer of such institution has unpaid financial liabilities involving the improper acquisition, expenditure, or refund of State or Federal financial assistance funds;


except that, if a guaranty agency limits, suspends, or terminates the participation of an eligible institution, the Secretary shall apply that limitation, suspension, or termination to all locations of such institution, unless the Secretary finds, within 30 days of notification of the action by the guaranty agency, that the guaranty agency's action did not comply with the requirements of this section;

(U) provides (i) for the eligibility of all lenders described in section 1085(d)(1) of this title under reasonable criteria, unless (I) that lender is eliminated as a lender under regulations for the emergency action, limitation, suspension, or termination of a lender under the Federal student loan insurance program or is eliminated as a lender pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility as a lender issued under the Federal student loan insurance program, or (II) there is a State constitutional prohibition affecting the eligibility of a lender, (ii) assurances that the guaranty agency will report to the Secretary concerning changes in such criteria, including any procedures in effect under such program to take emergency action, limit, suspend, or terminate lenders, and (iii) for (I) a compliance audit of each lender that originates or holds more than $5,000,000 in loans made under this subchapter for any lender fiscal year (except that each lender described in section 1085(d)(1)(A)(ii)(III) of this title shall annually submit the results of an audit required by this clause), at least once a year and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary, or (II) with regard to a lender that is audited under chapter 75 of title 31, such audit shall be deemed to satisfy the requirements of subclause (I) for the period covered by such audit, except that the Secretary may waive the requirements of this clause (iii) if the lender submits to the Secretary the results of an audit conducted for other purposes that the Secretary determines provides the same information as the audits required by this clause;

(V) provides authority for the guaranty agency to require a participation agreement between the guaranty agency and each eligible institution within the State in which it is designated, as a condition for guaranteeing loans made on behalf of students attending the institution;

(W) provides assurances that the agency will implement all requirements of the Secretary for uniform claims and procedures pursuant to section 1082(l) of this title;

(X) provides information to the Secretary in accordance with subsection (c)(9) and maintains reserve funds determined by the Secretary to be sufficient in relation to such agency's guarantee obligations; and

(Y) provides that—

(i) the lender shall determine the eligibility of a borrower for a deferment described in subparagraph (M)(i) based on—

(I) receipt of a request for deferment from the borrower and documentation of the borrower's eligibility for the deferment;

(II) receipt of a newly completed loan application that documents the borrower's eligibility for a deferment;

(III) receipt of student status information documenting that the borrower is enrolled on at least a half-time basis; or

(IV) the lender's confirmation of the borrower's half-time enrollment status through use of the National Student Loan Data System, if the confirmation is requested by the institution of higher education;


(ii) the lender will notify the borrower of the granting of any deferment under clause (i)(II) or (III) of this subparagraph and of the option to continue paying on the loan; and

(iii) the lender shall, at the time the lender grants a deferment to a borrower who received a loan under section 1078–8 of this title and is eligible for a deferment under subparagraph (M) of this paragraph, provide information to the borrower to assist the borrower in understanding the impact of the capitalization of interest on the borrower's loan principal and on the total amount of interest to be paid during the life of the loan.

(2) Contents of insurance program agreement

Such an agreement shall—

(A) provide that the holder of any such loan will be required to submit to the Secretary, at such time or times and in such manner as the Secretary may prescribe, statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the Secretary to determine the amount of the payment which must be made with respect to that loan;

(B) include such other provisions as may be necessary to protect the United States from the risk of unreasonable loss and promote the purpose of this part, including such provisions as may be necessary for the purpose of section 1087 of this title, and as are agreed to by the Secretary and the guaranty agency, as the case may be;

(C) provide for making such reports, in such form and containing such information, including financial information, as the Secretary may reasonably require to carry out the Secretary's functions under this part and protect the financial interest of the United States, and for keeping such records and for affording such access thereto as the Secretary may find necessary to assure the correctness and verification of such reports;

(D) provide for—

(i) conducting, except as provided in clause (ii), financial and compliance audits of the guaranty agency on at least an annual basis and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary; or

(ii) with regard to a guaranty program of a State which is audited under chapter 75 of title 31, deeming such audit to satisfy the requirements of clause (i) for the period of time covered by such audit;


(E)(i) provide that any guaranty agency may transfer loans which are insured under this part to any other guaranty agency with the approval of the holder of the loan and such other guaranty agency; and

(ii) provide that the lender (or the holder of the loan) shall, not later than 120 days after the borrower has left the eligible institution, notify the borrower of the date on which the repayment period begins; and

(F) provide that, if the sale, other transfer, or assignment of a loan made under this part to another holder will result in a change in the identity of the party to whom the borrower must send subsequent payments or direct any communications concerning the loans, then—

(i) the transferor and the transferee will be required, not later than 45 days from the date the transferee acquires a legally enforceable right to receive payment from the borrower on such loan, either jointly or separately to provide a notice to the borrower of—

(I) the sale or other transfer;

(II) the identity of the transferee;

(III) the name and address of the party to whom subsequent payments or communications must be sent;

(IV) the telephone numbers of both the transferor and the transferee;

(V) the effective date of the transfer;

(VI) the date on which the current servicer (as of the date of the notice) will stop accepting payments; and

(VII) the date on which the new servicer will begin accepting payments; and


(ii) the transferee will be required to notify the guaranty agency, and, upon the request of an institution of higher education, the guaranty agency shall notify the last such institution the student attended prior to the beginning of the repayment period of any loan made under this part, of—

(I) any sale or other transfer of the loan; and

(II) the address and telephone number by which contact may be made with the new holder concerning repayment of the loan,


except that this subparagraph (F) shall only apply if the borrower is in the grace period described in section 1077(a)(2)(B) of this title or subsection (b)(7) or is in repayment status.

(3) Restrictions on inducements, payments, mailings, and advertising

A guaranty agency shall not—

(A) offer, directly or indirectly, premiums, payments, stock or other securities, prizes, travel, entertainment expenses, tuition payment or reimbursement, or other inducements to—

(i) any institution of higher education, any employee of an institution of higher education, or any individual or entity in order to secure applicants for loans made under this part; or

(ii) any lender, or any agent, employee, or independent contractor of any lender or guaranty agency, in order to administer or market loans made under this part (other than a loan made as part of the guaranty agency's lender-of-last-resort program pursuant to subsection (j)), for the purpose of securing the designation of the guaranty agency as the insurer of such loans;


(B) conduct unsolicited mailings, by postal or electronic means, of student loan application forms to students enrolled in secondary schools or postsecondary educational institutions, or to the families of such students, except that applications may be mailed, by postal or electronic means, to students or borrowers who have previously received loans guaranteed under this part by the guaranty agency;

(C) perform, for an institution of higher education participating in a program under this subchapter, any function that such institution is required to perform under this subchapter, except that the guaranty agency may perform functions on behalf of such institution in accordance with section 1092(b) or 1092(l) of this title;

(D) pay, on behalf of an institution of higher education, another person to perform any function that such institution is required to perform under this subchapter, except that the guaranty agency may perform functions on behalf of such institution in accordance with section 1092(b) or 1092(l) of this title; or

(E) conduct fraudulent or misleading advertising concerning loan availability, terms, or conditions.


It shall not be a violation of this paragraph for a guaranty agency to provide technical assistance to institutions of higher education comparable to the technical assistance provided to institutions of higher education by the Department.

(4) Special rule

With respect to the graduate fellowship program referred to in paragraph (1)(M)(i)(II), the Secretary shall approve any course of study at a foreign university that is accepted for the completion of a recognized international fellowship program by the administrator of such a program. Requests for deferment of repayment of loans under this part by students engaged in graduate or postgraduate fellowship-supported study (such as pursuant to a Fulbright grant) outside the United States shall be approved until completion of the period of the fellowship.

(5) Guaranty agency information transfers

(A) Until such time as the Secretary has implemented section 1092b of this title and is able to provide to guaranty agencies the information required by such section, any guaranty agency may request information regarding loans made after January 1, 1987, to students who are residents of the State for which the agency is the designated guarantor, from any other guaranty agency insuring loans to such students.

(B) Upon a request pursuant to subparagraph (A), a guaranty agency shall provide—

(i) the name and the social security number of the borrower; and

(ii) the amount borrowed and the cumulative amount borrowed.


(C) Any costs associated with fulfilling the request of a guaranty agency for information on students shall be paid by the guaranty agency requesting the information.

(6) State guaranty agency information request of State licensing boards

Each guaranty agency is authorized to enter into agreements with each appropriate State licensing board under which the State licensing board, upon request, will furnish the guaranty agency with the address of a student borrower in any case in which the location of the student borrower is unknown or unavailable to the guaranty agency.

(7) Repayment period

(A) In the case of a loan made under section 1077 of this title or this section, the repayment period shall exclude any period of authorized deferment or forbearance and shall begin the day after 6 months after the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution).

(B) In the case of a loan made under section 1078–8 of this title, the repayment period shall exclude any period of authorized deferment or forbearance, and shall begin as described in subparagraph (A), but interest shall begin to accrue or be paid by the borrower on the day the loan is disbursed.

(C) In the case of a loan made under section 1078–2 or 1078–3 of this title, the repayment period shall begin on the day the loan is disbursed, or, if the loan is disbursed in multiple installments, on the day of the last such disbursement, and shall exclude any period of authorized deferment or forbearance.

(D) There shall be excluded from the 6-month period that begins on the date on which a student ceases to carry at least one-half the normal full-time academic workload as described in subparagraph (A) any period not to exceed 3 years during which a borrower who is a member of a reserve component of the Armed Forces named in section 10101 of title 10 is called or ordered to active duty for a period of more than 30 days (as defined in section 101(d)(2) of such title). Such period of exclusion shall include the period necessary to resume enrollment at the borrower's next available regular enrollment period.

(8) Means of disbursement of loan proceeds

Nothing in this subchapter shall be interpreted to prohibit the disbursement of loan proceeds by means other than by check or to allow the Secretary to require checks to be made co-payable to the institution and the borrower.

(9) Repayment plans

(A) Design and selection

In accordance with regulations promulgated by the Secretary, the lender shall offer a borrower of a loan made under this part the plans described in this subparagraph for repayment of such loan, including principal and interest thereon. No plan may require a borrower to repay a loan in less than 5 years unless the borrower, during the 6 months immediately preceding the start of the repayment period, specifically requests that repayment be made over of 3 a shorter period. The borrower may choose from—

(i) a standard repayment plan, with a fixed annual repayment amount paid over a fixed period of time, not to exceed 10 years;

(ii) a graduated repayment plan paid over a fixed period of time, not to exceed 10 years;

(iii) an income-sensitive repayment plan, with income-sensitive repayment amounts paid over a fixed period of time, not to exceed 10 years, except that the borrower's scheduled payments shall not be less than the amount of interest due;

(iv) for new borrowers on or after October 7, 1998, who accumulate (after October 7, 1998) outstanding loans under this part totaling more than $30,000, an extended repayment plan, with a fixed annual or graduated repayment amount paid over an extended period of time, not to exceed 25 years, except that the borrower shall repay annually a minimum amount determined in accordance with paragraph (1)(L)(i); and

(v) beginning July 1, 2009, an income-based repayment plan that enables a borrower who has a partial financial hardship to make a lower monthly payment in accordance with section 1098e of this title, except that the plan described in this clause shall not be available to a borrower for a loan under section 1078–2 of this title made on behalf of a dependent student or for a consolidation loan under section 1078–3 of this title, if the proceeds of such loan were used to discharge the liability of a loan under section 1078–2 of this title made on behalf of a dependent student.

(B) Lender selection of option if borrower does not select

If a borrower of a loan made under this part does not select a repayment plan described in subparagraph (A), the lender shall provide the borrower with a repayment plan described in subparagraph (A)(i).

(c) Guaranty agreements for reimbursing losses

(1) Authority to enter into agreements

(A) The Secretary may enter into a guaranty agreement with any guaranty agency, whereby the Secretary shall undertake to reimburse it, under such terms and conditions as the Secretary may establish, with respect to losses (resulting from the default of the student borrower) on the unpaid balance of the principal and accrued interest of any insured loan. The guaranty agency shall be deemed to have a contractual right against the United States, during the life of such loan, to receive reimbursement according to the provisions of this subsection. Upon receipt of an accurate and complete request by a guaranty agency for reimbursement with respect to such losses, the Secretary shall pay promptly and without administrative delay. Except as provided in subparagraph (B) of this paragraph and in paragraph (7), the amount to be paid a guaranty agency as reimbursement under this subsection shall be equal to 100 percent of the amount expended by it in discharge of its insurance obligation incurred under its loan insurance program. A guaranty agency shall file a claim for reimbursement with respect to losses under this subsection within 30 days after the guaranty agency discharges its insurance obligation on the loan.

(B) Notwithstanding subparagraph (A)—

(i) if, for any fiscal year, the amount of such reimbursement payments by the Secretary under this subsection exceeds 5 percent of the loans which are insured by such guaranty agency under such program and which were in repayment at the end of the preceding fiscal year, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 85 percent of the amount of such excess; and

(ii) if, for any fiscal year, the amount of such reimbursement payments exceeds 9 percent of such loans, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 75 percent of the amount of such excess.


(C) For the purpose of this subsection, the amount of loans of a guaranty agency which are in repayment shall be the original principal amount of loans made by a lender which are insured by such a guaranty agency reduced by—

(i) the amount the insurer has been required to pay to discharge its insurance obligations under this part;

(ii) the original principal amount of loans insured by it which have been fully repaid; and

(iii) the original principal amount insured on those loans for which payment of the first installment of principal has not become due pursuant to subsection (b)(1)(E) of this section or such first installment need not be paid pursuant to subsection (b)(1)(M) of this section.


(D) Notwithstanding any other provisions of this section, in the case of a loan made pursuant to a lender-of-last-resort program, the Secretary shall apply the provisions of—

(i) the fourth sentence of subparagraph (A) by substituting "100 percent" for "95 percent"; 1

(ii) subparagraph (B)(i) by substituting "100 percent" for "85 percent"; and

(iii) subparagraph (B)(ii) by substituting "100 percent" for "75 percent".


(E) Notwithstanding any other provisions of this section, in the case of an outstanding loan transferred to a guaranty agency from another guaranty agency pursuant to a plan approved by the Secretary in response to the insolvency of the latter such guarantee agency, the Secretary shall apply the provision of—

(i) the fourth sentence of subparagraph (A) by substituting "100 percent" for "95 percent"; 1

(ii) subparagraph (B)(i) by substituting "90 percent" for "85 percent"; and

(iii) subparagraph (B)(ii) by substituting "80 percent" for "75 percent".


(F)(i) Notwithstanding any other provisions of this section, in the case of exempt claims, the Secretary shall apply the provisions of—

(I) the fourth sentence of subparagraph (A) by substituting "100 percent" for "95 percent"; 1

(II) subparagraph (B)(i) by substituting "100 percent" for "85 percent"; and

(III) subparagraph (B)(ii) by substituting "100 percent" for "75 percent".


(ii) For purposes of clause (i) of this subparagraph, the term "exempt claims" means claims with respect to loans for which it is determined that the borrower (or the student on whose behalf a parent has borrowed), without the lender's or the institution's knowledge at the time the loan was made, provided false or erroneous information or took actions that caused the borrower or the student to be ineligible for all or a portion of the loan or for interest benefits thereon.

(G) Notwithstanding any other provision of this section, the Secretary shall exclude a loan made pursuant to a lender-of-last-resort program when making reimbursement payment calculations under subparagraphs (B) and (C).

(2) Contents of guaranty agreements

The guaranty agreement—

(A) shall set forth such administrative and fiscal procedures as may be necessary to protect the United States from the risk of unreasonable loss thereunder, to ensure proper and efficient administration of the loan insurance program, and to assure that due diligence will be exercised in the collection of loans insured under the program, including (i) a requirement that each beneficiary of insurance on the loan submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known) and (ii) requirements establishing procedures to preclude consolidation lending from being an excessive proportion of guaranty agency recoveries on defaulted loans under this part;

(B) shall provide for making such reports, in such form and containing such information, as the Secretary may reasonably require to carry out the Secretary's functions under this subsection, and for keeping such records and for affording such access thereto as the Secretary may find necessary to assure the correctness and verification of such reports;

(C) shall set forth adequate assurances that, with respect to so much of any loan insured under the loan insurance program as may be guaranteed by the Secretary pursuant to this subsection, the undertaking of the Secretary under the guaranty agreement is acceptable in full satisfaction of State law or regulation requiring the maintenance of a reserve;

(D) shall provide that if, after the Secretary has made payment under the guaranty agreement pursuant to paragraph (1) of this subsection with respect to any loan, any payments are made in discharge of the obligation incurred by the borrower with respect to such loan (including any payments of interest accruing on such loan after such payment by the Secretary), there shall be paid over to the Secretary (for deposit in the fund established by section 1081 of this title) such proportion of the amounts of such payments as is determined (in accordance with paragraph (6)(A)) to represent his equitable share thereof, but (i) shall provide for subrogation of the United States to the rights of any insurance beneficiary only to the extent required for the purpose of paragraph (8); and (ii) except as the Secretary may otherwise by or pursuant to regulation provide, amounts so paid by a borrower on such a loan shall be first applied in reduction of principal owing on such loan;

(E) shall set forth adequate assurance that an amount equal to each payment made under paragraph (1) will be promptly deposited in or credited to the accounts maintained for the purpose of section 1072(c) of this title;

(F) set forth adequate assurances that the guaranty agency will not engage in any pattern or practice which results in a denial of a borrower's access to loans under this part because of the borrower's race, sex, color, religion, national origin, age, handicapped status, income, attendance at a particular eligible institution within the area served by the guaranty agency, length of the borrower's educational program, or the borrower's academic year in school;

(G) shall prohibit the Secretary from making any reimbursement under this subsection to a guaranty agency when a default claim is based on an inability to locate the borrower, unless the guaranty agency, at the time of filing for reimbursement, certifies to the Secretary that diligent attempts, including contact with the institution, have been made to locate the borrower through the use of reasonable skip-tracing techniques in accordance with regulations prescribed by the Secretary; and

(H) set forth assurances that—

(i) upon the request of an eligible institution, the guaranty agency shall, subject to clauses (ii) and (iii), furnish to the institution information with respect to students (including the names and addresses of such students) who received loans made, insured, or guaranteed under this part for attendance at the eligible institution and for whom default aversion assistance activities have been requested under subsection (l);

(ii) the guaranty agency shall not require the payment from the institution of any fee for such information; and

(iii) the guaranty agency will require the institution to use such information only to assist the institution in reminding students of their obligation to repay student loans and shall prohibit the institution from disseminating the information for any other purpose.


(I) may include such other provisions as may be necessary to promote the purpose of this part.

(3) Forbearance

A guaranty agreement under this subsection—

(A) shall contain provisions providing that—

(i) upon request, a lender shall grant a borrower forbearance, renewable at 12-month intervals, on terms agreed to by the parties to the loan with the approval of the insurer and documented in accordance with paragraph (10), and otherwise consistent with the regulations of the Secretary, if the borrower—

(I) is serving in a medical or dental internship or residency program, the successful completion of which is required to begin professional practice or service, or is serving in a medical or dental internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training, provided that if the borrower qualifies for a deferment under section 1077(a)(2)(C)(vii) of this title or subsection (b)(1)(M)(vii) of this section as in effect prior to the enactment of the Higher Education Amendments of 1992, or section 1077(a)(2)(C) of this title or subsection (b)(1)(M) of this section as amended by such amendments, the borrower has exhausted his or her eligibility for such deferment;

(II) has a debt burden under this subchapter that equals or exceeds 20 percent of income;

(III) is serving in a national service position for which the borrower receives a national service educational award under the National and Community Service Trust Act of 1993; or

(IV) is eligible for interest payments to be made on such loan for service in the Armed Forces under section 2174 of title 10, and, pursuant to that eligibility, the interest is being paid on such loan under subsection (o);


(ii) the length of the forbearance granted by the lender—

(I) under clause (i)(I) shall equal the length of time remaining in the borrower's medical or dental internship or residency program, if the borrower is not eligible to receive a deferment described in such clause, or such length of time remaining in the program after the borrower has exhausted the borrower's eligibility for such deferment;

(II) under clause (i)(II) or (IV) shall not exceed 3 years; or

(III) under clause (i)(III) shall not exceed the period for which the borrower is serving in a position described in such clause; and


(iii) no administrative or other fee may be charged in connection with the granting of a forbearance under clause (i), and no adverse information regarding a borrower may be reported to a consumer reporting agency solely because of the granting of such forbearance;


(B) may, to the extent provided in regulations of the Secretary, contain provisions that permit such forbearance for the benefit of the student borrower as may be agreed upon by the parties to an insured loan and approved by the insurer;

(C) shall contain provisions that specify that—

(i) the form of forbearance granted by the lender pursuant to this paragraph, other than subparagraph (A)(i)(IV), shall be temporary cessation of payments, unless the borrower selects forbearance in the form of an extension of time for making payments, or smaller payments than were previously scheduled;

(ii) the form of forbearance granted by the lender pursuant to subparagraph (A)(i)(IV) shall be the temporary cessation of all payments on the loan other than payments of interest on the loan that are made under subsection (o);

(iii) the lender shall, at the time of granting a borrower forbearance, provide information to the borrower to assist the borrower in understanding the impact of capitalization of interest on the borrower's loan principal and total amount of interest to be paid during the life of the loan; and

(iv) the lender shall contact the borrower not less often than once every 180 days during the period of forbearance to inform the borrower of—

(I) the amount of unpaid principal and the amount of interest that has accrued since the last statement of such amounts provided to the borrower by the lender;

(II) the fact that interest will accrue on the loan for the period of forbearance;

(III) the amount of interest that will be capitalized, and the date on which capitalization will occur;

(IV) the option of the borrower to pay the interest that has accrued before the interest is capitalized; and

(V) the borrower's option to discontinue the forbearance at any time; and


(D) shall contain provisions that specify that—

(i) forbearance for a period not to exceed 60 days may be granted if the lender reasonably determines that such a suspension of collection activity is warranted following a borrower's request for deferment, forbearance, a change in repayment plan, or a request to consolidate loans, in order to collect or process appropriate supporting documentation related to the request, and

(ii) during such period interest shall accrue but not be capitalized.


Guaranty agencies shall not be precluded from permitting the parties to such a loan from entering into a forbearance agreement solely because the loan is in default. The Secretary shall permit lenders to exercise administrative forbearances that do not require the agreement of the borrower, under conditions authorized by the Secretary. Such forbearances shall include (i) forbearances for borrowers who are delinquent at the time of the granting of an authorized period of deferment under subsection (b)(1)(M) or section 1077(a)(2)(C) of this title, and (ii) if the borrower is less than 60 days delinquent on such loans at the time of sale or transfer, forbearances for borrowers on loans which are sold or transferred.

(4) Definitions

For the purpose of this subsection, the terms "insurance beneficiary" and "default" have the meanings assigned to them by section 1085 of this title.

(5) Applicability to existing loans

In the case of any guaranty agreement with a guaranty agency, the Secretary may, in accordance with the terms of this subsection, undertake to guarantee loans described in paragraph (1) which are insured by such guaranty agency and are outstanding on the date of execution of the guaranty agreement, but only with respect to defaults occurring after the execution of such guaranty agreement or, if later, after its effective date.

(6) Secretary's equitable share

(A) For the purpose of paragraph (2)(D), the Secretary's equitable share of payments made by the borrower shall be that portion of the payments remaining after the guaranty agency with which the Secretary has an agreement under this subsection has deducted from such payments—

(i) a percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and

(ii) an amount equal to 24 percent of such payments for use in accordance with section 1072b of this title, except that—

(I) beginning October 1, 2003 and ending September 30, 2007, this clause shall be applied by substituting "23 percent" for "24 percent"; and

(II) beginning October 1, 2007, this clause shall be applied by substituting "16 percent" for "24 percent".


(B) A guaranty agency shall—

(i) on or after October 1, 2006—

(I) not charge the borrower collection costs in an amount in excess of 18.5 percent of the outstanding principal and interest of a defaulted loan that is paid off through consolidation by the borrower under this subchapter; and

(II) remit to the Secretary a portion of the collection charge under subclause (I) equal to 8.5 percent of the outstanding principal and interest of such defaulted loan; and


(ii) on and after October 1, 2009, remit to the Secretary the entire amount charged under clause (i)(I) with respect to each defaulted loan that is paid off with excess consolidation proceeds.


(C) For purposes of subparagraph (B), the term "excess consolidation proceeds" means, with respect to any guaranty agency for any Federal fiscal year beginning on or after October 1, 2009, the proceeds of consolidation of defaulted loans under this subchapter that exceed 45 percent of the agency's total collections on defaulted loans in such Federal fiscal year.

(7) New programs eligible for 100 percent reinsurance

(A) Notwithstanding paragraph (1)(C), the amount to be paid a guaranty agency for any fiscal year—

(i) which begins on or after October 1, 1977 and ends before October 1, 1991; and

(ii) which is either the fiscal year in which such guaranty agency begins to actively carry on a student loan insurance program which is subject to a guaranty agreement under subsection (b) of this section, or is one of the 4 succeeding fiscal years,


shall be 100 percent of the amount expended by such guaranty agency in discharge of its insurance obligation insured under such program.

(B) Notwithstanding the provisions of paragraph (1)(C), the Secretary may pay a guaranty agency 100 percent of the amount expended by such agency in discharge of such agency's insurance obligation for any fiscal year which—

(i) begins on or after October 1, 1991; and

(ii) is the fiscal year in which such guaranty agency begins to actively carry on a student loan insurance program which is subject to a guaranty agreement under subsection (b) or is one of the 4 succeeding fiscal years.


(C) The Secretary shall continuously monitor the operations of those guaranty agencies to which the provisions of subparagraph (A) or (B) are applicable and revoke the application of such subparagraph to any such guaranty agency which the Secretary determines has not exercised reasonable prudence in the administration of such program.

(8) Assignment to protect Federal fiscal interest

If the Secretary determines that the protection of the Federal fiscal interest so requires, a guaranty agency shall assign to the Secretary any loan of which it is the holder and for which the Secretary has made a payment pursuant to paragraph (1) of this subsection.

(9) Guaranty agency reserve level

(A) Each guaranty agency which has entered into an agreement with the Secretary pursuant to this subsection shall maintain in the agency's Federal Student Loan Reserve Fund established under section 1072a of this title a current minimum reserve level of at least 0.25 percent of the total attributable amount of all outstanding loans guaranteed by such agency. For purposes of this paragraph, such total attributable amount does not include amounts of outstanding loans transferred to the guaranty agency from another guaranty agency pursuant to a plan of the Secretary in response to the insolvency of the latter such guaranty agency.

(B) The Secretary shall collect, on an annual basis, information from each guaranty agency having an agreement under this subsection to enable the Secretary to evaluate the financial solvency of each such agency. The information collected shall include the level of such agency's current reserves, cash disbursements and accounts receivable.

(C) If (i) any guaranty agency falls below the required minimum reserve level in any 2 consecutive years, (ii) any guaranty agency's Federal reimbursement payments are reduced to 85 percent pursuant to paragraph (1)(B)(i), or (iii) the Secretary determines that the administrative or financial condition of a guaranty agency jeopardizes such agency's continued ability to perform its responsibilities under its guaranty agreement, then the Secretary shall require the guaranty agency to submit and implement a management plan acceptable to the Secretary within 45 working days of any such event.

(D)(i) If the Secretary is not seeking to terminate the guaranty agency's agreement under subparagraph (E), or assuming the guaranty agency's functions under subparagraph (F), a management plan described in subparagraph (C) shall include the means by which the guaranty agency will improve its financial and administrative condition to the required level within 18 months.

(ii) If the Secretary is seeking to terminate the guaranty agency's agreement under subparagraph (E), or assuming the guaranty agency's functions under subparagraph (F), a management plan described in subparagraph (C) shall include the means by which the Secretary and the guaranty agency shall work together to ensure the orderly termination of the operations, and liquidation of the assets, of the guaranty agency.

(E) The Secretary may terminate a guaranty agency's agreement in accordance with subparagraph (F) if—

(i) a guaranty agency required to submit a management plan under this paragraph fails to submit a plan that is acceptable to the Secretary;

(ii) the Secretary determines that a guaranty agency has failed to improve substantially its administrative and financial condition;

(iii) the Secretary determines that the guaranty agency is in danger of financial collapse;

(iv) the Secretary determines that such action is necessary to protect the Federal fiscal interest; or

(v) the Secretary determines that such action is necessary to ensure the continued availability of loans to student or parent borrowers.


(F) If a guaranty agency's agreement under this subsection is terminated pursuant to subparagraph (E), then the Secretary shall assume responsibility for all functions of the guaranty agency under the loan insurance program of such agency. In performing such functions the Secretary is authorized to—

(i) permit the transfer of guarantees to another guaranty agency;

(ii) revoke the reinsurance agreement of the guaranty agency at a specified date, so as to require the merger, consolidation, or termination of the guaranty agency;

(iii) transfer guarantees to the Department of Education for the purpose of payment of such claims and process such claims using the claims standards of the guaranty agency, if such standards are determined by the Secretary to be in compliance with this chapter;

(iv) design and implement a plan to restore the guaranty agency's viability;

(v) provide the guaranty agency with additional advance funds in accordance with section 1072(c)(7) of this title, with such restrictions on the use of such funds as is determined appropriate by the Secretary, in order to—

(I) meet the immediate cash needs of the guaranty agency;

(II) ensure the uninterrupted payment of claims; or

(III) ensure that the guaranty agency will make loans as the lender-of-last-resort, in accordance with subsection (j);


(vi) use all funds and assets of the guaranty agency to assist in the activities undertaken in accordance with this subparagraph and take appropriate action to require the return, to the guaranty agency or the Secretary, of any funds or assets provided by the guaranty agency, under contract or otherwise, to any person or organization; or

(vii) take any other action the Secretary determines necessary to ensure the continued availability of loans made under this part to residents of the State or States in which the guaranty agency did business, the full honoring of all guarantees issued by the guaranty agency prior to the Secretary's assumption of the functions of such agency, and the proper servicing of loans guaranteed by the guaranty agency prior to the Secretary's assumption of the functions of such agency, and to avoid disruption of the student loan program.


(G) Notwithstanding any other provision of Federal or State law, if the Secretary has terminated or is seeking to terminate a guaranty agency's agreement under subparagraph (E), or has assumed a guaranty agency's functions under subparagraph (F)—

(i) no State court may issue any order affecting the Secretary's actions with respect to such guaranty agency;

(ii) any contract with respect to the administration of a guaranty agency's reserve funds, or the administration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guaranty agency, or any other party on behalf of or with the concurrence of the guaranty agency, after August 10, 1993, shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract includes an impermissible transfer of the reserve funds or assets, or is otherwise inconsistent with the terms or purposes of this section; and

(iii) no provision of State law shall apply to the actions of the Secretary in terminating the operations of a guaranty agency.


(H) Notwithstanding any other provision of law, the Secretary's liability for any outstanding liabilities of a guaranty agency (other than outstanding student loan guarantees under this part), the functions of which the Secretary has assumed, shall not exceed the fair market value of the reserves of the guaranty agency, minus any necessary liquidation or other administrative costs.

(I) The Secretary shall not take any action under subparagraph (E) or (F) without giving the guaranty agency notice and the opportunity for a hearing that, if commenced after September 24, 1998, shall be on the record.

(J) Notwithstanding any other provision of law, the information transmitted to the Secretary pursuant to this paragraph shall be confidential and exempt from disclosure under section 552 of title 5, relating to freedom of information, or any other Federal law.

(K) The Secretary, within 6 months after the end of each fiscal year, shall submit to the authorizing committees a report specifying the Secretary's assessment of the fiscal soundness of the guaranty agency system.

(10) Documentation of forbearance agreements

For the purposes of paragraph (3), the terms of forbearance agreed to by the parties shall be documented by confirming the agreement of the borrower by notice to the borrower from the lender, and by recording the terms in the borrower's file.

(d) Usury laws inapplicable

No provision of any law of the United States (other than this chapter and section 3937 of title 50) or of any State (other than a statute applicable principally to such State's student loan insurance program) which limits the rate or amount of interest payable on loans shall apply to a loan—

(1) which bears interest (exclusive of any premium for insurance) on the unpaid principal balance at a rate not in excess of the rate specified in this part; and

(2) which is insured (i) by the United States under this part, or (ii) by a guaranty agency under a program covered by an agreement made pursuant to subsection (b) of this section.

(e) Repealed. Pub. L. 110–315, title IV, §422(h), Aug. 14, 2008, 122 Stat. 3231

(f) Payments of certain costs

(1) 4 Payment for certain activities

(A) In general

The Secretary—

(i) for loans originated during fiscal years beginning on or after October 1, 1998, and before October 1, 2003, and in accordance with the provisions of this paragraph, shall, except as provided in subparagraph (C), pay to each guaranty agency, a loan processing and issuance fee equal to 0.65 percent of the total principal amount of the loans on which insurance was issued under this part during such fiscal year by such agency; and

(ii) for loans originated on or after October 1, 2003, and first disbursed before July 1, 2010, and in accordance with the provisions of this paragraph, shall, except as provided in subparagraph (C), pay to each guaranty agency, a loan processing and issuance fee equal to 0.40 percent of the total principal amount of the loans on which insurance was issued under this part during such fiscal year by such agency.

(B) Payment

The payment required by subparagraph (A) shall be paid on a quarterly basis. The guaranty agency shall be deemed to have a contractual right against the United States to receive payments according to the provisions of this paragraph. Payments shall be made promptly and without administrative delay to any guaranty agency submitting an accurate and complete application under this subparagraph.

(C) Requirement for payment

No payment may be made under this paragraph for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been completed.

(g) Action on insurance program and guaranty agreements

If a nonprofit private institution or organization—

(1) applies to enter into an agreement with the Secretary under subsections (b) and (c) with respect to a student loan insurance program to be carried on in a State with which the Secretary does not have an agreement under subsection (b), and

(2) as provided in the application, undertakes to meet the requirements of section 1072(c)(6)(B)(i), (ii), and (iii) of this title,


the Secretary shall consider and act upon such application within 180 days, and shall forthwith notify the authorizing committees of his actions.

(h) Repealed. Pub. L. 110–315, title IV, §438(a)(2)(B), Aug. 14, 2008, 122 Stat. 3258

(i) Multiple disbursement of loans

(1) Escrow accounts administered by escrow agent

Any guaranty agency or eligible lender (hereafter in this subsection referred to as the "escrow agent") may enter into an agreement with any other eligible lender that is not an eligible institution or an agency or instrumentality of the State (hereafter in this subsection referred to as the "lender") for the purpose of authorizing disbursements of the proceeds of a loan to a student. Such agreement shall provide that the lender will pay the proceeds of such loans into an escrow account to be administered by the escrow agent in accordance with the provisions of paragraph (2) of this subsection. Such agreement may allow the lender to make payments into the escrow account in amounts that do not exceed the sum of the amounts required for disbursement of initial or subsequent installments to borrowers and to make such payments not more than 10 days prior to the date of the disbursement of such installment to such borrowers. Such agreement shall require the lender to notify promptly the eligible institution when funds are escrowed under this subsection for a student at such institution.

(2) Authority of escrow agent

Each escrow agent entering into an agreement under paragraph (1) of this subsection is authorized to—

(A) make the disbursements in accordance with the note evidencing the loan;

(B) commingle the proceeds of all loans paid to the escrow agent pursuant to the escrow agreement entered into under such paragraph (1);

(C) invest the proceeds of such loans in obligations of the Federal Government or obligations which are insured or guaranteed by the Federal Government;

(D) retain interest or other earnings on such investment; and

(E) return to the lender undisbursed funds when the student ceases to carry at an eligible institution at least one-half of the normal full-time academic workload as determined by the institution.

(j) Lenders-of-last-resort

(1) General requirement

In each State, the guaranty agency or an eligible lender in the State described in section 1085(d)(1)(D) of this title shall, before July 1, 2010, make loans directly, or through an agreement with an eligible lender or lenders, to eligible students and parents who are otherwise unable to obtain loans under this part (except for consolidation loans under section 1078–3 of this title) or who attend an institution of higher education in the State that is designated under paragraph (4). Loans made under this subsection shall not exceed the amount of the need of the borrower, as determined under subsection (a)(2)(B), nor be less than $200. No loan under section 1078, 1078–2, or 1078–8 of this title that is made pursuant to this subsection shall be made with interest rates, origination or default fees, or other terms and conditions that are more favorable to the borrower than the maximum interest rates, origination or default fees, or other terms and conditions applicable to that type of loan under this part. The guaranty agency shall consider the request of any eligible lender, as defined under section 1085(d)(1)(A) of this title, to serve as the lender-of-last-resort pursuant to this subsection.

(2) Rules and operating procedures

The guaranty agency shall develop rules and operating procedures for the lender-of-last-resort program designed to ensure that—

(A) the program establishes operating hours and methods of application designed to facilitate application by students and ensure a response within 60 days after the student's original complete application is filed under this subsection;

(B) consistent with standards established by the Secretary, students applying for loans under this subsection shall not be subject to additional eligibility requirements or requests for additional information beyond what is required under this subchapter in order to receive a loan under this part from an eligible lender, nor, in the case of students and parents applying for loans under this subsection because of an inability to otherwise obtain loans under this part (except for consolidation loans under section 1078–3 of this title), be required to receive more than two rejections from eligible lenders in order to obtain a loan under this subsection;

(C) information about the availability of loans under the program is made available to institutions of higher education in the State; and

(D) appropriate steps are taken to ensure that borrowers receiving loans under the program are appropriately counseled on their loan obligation.

(3) Advances to guaranty agencies for lender-of-last-resort services

(A) In order to ensure the availability of loan capital, the Secretary is authorized to provide a guaranty agency designated for a State with additional advance funds in accordance with subparagraph (C) and section 1072(c)(7) of this title, with such restrictions on the use of such funds as are determined appropriate by the Secretary, in order to ensure that the guaranty agency will make loans as the lender-of-last-resort. Such agency shall make such loans in accordance with this subsection and the requirements of the Secretary.

(B) Notwithstanding any other provision in this part, a guaranty agency serving as a lender-of-last-resort under this paragraph shall be paid a fee, established by the Secretary, for making such loans in lieu of interest and special allowance subsidies, and shall be required to assign such loans to the Secretary on demand. Upon such assignment, the portion of the advance represented by the loans assigned shall be considered repaid by such guaranty agency.

(C) The Secretary shall exercise the authority described in subparagraph (A) only if the Secretary determines that eligible borrowers are seeking and are unable to obtain loans under this part or designates an institution of higher education for participation in the program under this subsection under paragraph (4), and that the guaranty agency designated for that State has the capability to provide lender-of-last-resort loans in a timely manner, in accordance with the guaranty agency's obligations under paragraph (1), but cannot do so without advances provided by the Secretary under this paragraph. If the Secretary makes the determinations described in the preceding sentence and determines that it would be cost-effective to do so, the Secretary may provide advances under this paragraph to such guaranty agency. If the Secretary determines that such guaranty agency does not have such capability, or will not provide such loans in a timely fashion, the Secretary may provide such advances to enable another guaranty agency, that the Secretary determines to have such capability, to make lender-of-last-resort loans to eligible borrowers in that State who are experiencing loan access problems or to eligible borrowers who attend an institution in the State that is designated under paragraph (4).

(4) Institution-wide student qualification

Upon the request of an institution of higher education and pursuant to standards developed by the Secretary, the Secretary shall designate such institution for participation in the lender-of-last-resort program under this paragraph.5 If the Secretary designates an institution under this paragraph, the guaranty agency designated for the State in which the institution is located shall make loans, in the same manner as such loans are made under paragraph (1), to students and parent borrowers of the designated institution, regardless of whether the students or parent borrowers are otherwise unable to obtain loans under this part (other than a consolidation loan under section 1078–3 of this title).

(5) Standards developed by the Secretary

In developing standards with respect to paragraph (4), the Secretary may require—

(A) an institution of higher education to demonstrate that, despite due diligence on the part of the institution, the institution has been unable to secure the commitment of eligible lenders willing to make loans under this part to a significant number of students attending the institution;

(B) that, prior to making a request under such paragraph for designation for participation in the lender-of-last-resort program, an institution of higher education shall demonstrate that the institution has met a minimum threshold, as determined by the Secretary, for the number or percentage of students at such institution who have received rejections from eligible lenders for loans under this part; and

(C) any other standards and guidelines the Secretary determines to be appropriate.

(6) Expiration of authority

The Secretary's authority under paragraph (4) to designate institutions of higher education for participation in the program under this subsection shall expire on June 30, 2010.

(7) Expiration of designation

The eligibility of an institution of higher education, or borrowers from such institution, to participate in the program under this subsection pursuant to a designation of the institution by the Secretary under paragraph (4) shall expire on June 30, 2010. After such date, borrowers from an institution designated under paragraph (4) shall be eligible to participate in the program under this subsection as such program existed on the day before May 7, 2008.

(8) Prohibition on inducements and marketing

Each guaranty agency or eligible lender that serves as a lender-of-last-resort under this subsection—

(A) shall be subject to the prohibitions on inducements contained in subsection (b)(3) and the requirements of section 1085(d)(5) of this title; and

(B) shall not advertise, market, or otherwise promote loans under this subsection, except that nothing in this paragraph shall prohibit a guaranty agency from fulfilling its responsibilities under paragraph (2)(C).

(9) Dissemination and reporting

(A) In general

The Secretary shall—

(i) broadly disseminate information regarding the availability of loans made under this subsection;

(ii) during the period beginning July 1, 2008 and ending June 30, 2011, provide to the authorizing committees and make available to the public—

(I) copies of any new or revised plans or agreements made by guaranty agencies or the Department related to the authorities under this subsection;

(II) quarterly reports on—

(aa) the number and amounts of loans originated or approved pursuant to this subsection by each guaranty agency and eligible lender; and

(bb) any related payments by the Department, a guaranty agency, or an eligible lender; and


(III) a budget estimate of the costs to the Federal Government (including subsidy and administrative costs) for each 100 dollars loaned, of loans made pursuant to this subsection between May 7, 2008, and June 30, 2010, disaggregated by type of loan, compared to such costs to the Federal Government during such time period of comparable loans under this part and part D, disaggregated by part and by type of loan; and


(iii) beginning July 1, 2011, provide to the authorizing committees and make available to the public—

(I) copies of any new or revised plans or agreements made by guaranty agencies or the Department related to the authorities under this subsection; and

(II) annual reports on—

(aa) the number and amounts of loans originated or approved pursuant to this subsection by each guaranty agency and eligible lender; and

(bb) any related payments by the Department, a guaranty agency, or an eligible lender.

(B) Separate reporting

The information required to be reported under subparagraph (A)(ii)(II) shall be reported separately for loans originated or approved pursuant to paragraph (4), or payments related to such loans, for the time period in which the Secretary is authorized to make designations under paragraph (4).

(k) Information on defaults

(1) Provision of information to eligible institutions

Notwithstanding any other provision of law, in order to notify eligible institutions of former students who are in default of their continuing obligation to repay student loans, each guaranty agency shall, upon the request of an eligible institution, furnish information with respect to students who were enrolled at the eligible institution and who are in default on the repayment of any loan made, insured, or guaranteed under this part. The information authorized to be furnished under this subsection shall include the names and addresses of such students.

(2) Public dissemination not authorized

Nothing in paragraph (1) of this subsection shall be construed to authorize public dissemination of the information described in paragraph (1).

(3) Borrower location information

Any information provided by the institution relating to borrower location shall be used by the guaranty agency in conducting required skip-tracing activities.

(4) Provision of information to borrowers in default

Each guaranty agency that has received a default claim from a lender regarding a borrower, shall provide the borrower in default, on not less than two separate occasions, with a notice, in simple and understandable terms, of not less than the following information:

(A) The options available to the borrower to remove the borrower's loan from default.

(B) The relevant fees and conditions associated with each option.

(l) Default aversion assistance

(1) Assistance required

Upon receipt of a complete request from a lender received not earlier than the 60th day of delinquency, a guaranty agency having an agreement with the Secretary under subsection (c) shall engage in default aversion activities designed to prevent the default by a borrower on a loan covered by such agreement.

(2) Reimbursement

(A) In general

A guaranty agency, in accordance with the provisions of this paragraph, may transfer from the Federal Student Loan Reserve Fund under section 1072a of this title to the Agency Operating Fund under section 1072b of this title a default aversion fee. Such fee shall be paid for any loan on which a claim for default has not been paid as a result of the loan being brought into current repayment status by the guaranty agency on or before the 300th day after the loan becomes 60 days delinquent.

(B) Amount

The default aversion fee shall be equal to 1 percent of the total unpaid principal and accrued interest on the loan at the time the request is submitted by the lender. A guaranty agency may transfer such fees earned under this subsection not more frequently than monthly. Such a fee shall not be paid more than once on any loan for which the guaranty agency averts the default unless—

(i) at least 18 months has elapsed between the date the borrower entered current repayment status and the date the lender filed a subsequent default aversion assistance request; and

(ii) during the period between such dates, the borrower was not more than 30 days past due on any payment of principal and interest on the loan.

(C) Definition

For the purpose of earning the default aversion fee, the term "current repayment status" means that the borrower is not delinquent in the payment of any principal or interest on the loan.

(m) Income contingent and income-based repayment

(1) Authority of Secretary to require

The Secretary may require borrowers who have defaulted on loans made under this part that are assigned to the Secretary under subsection (c)(8) to repay those loans under an income contingent repayment plan or income-based repayment plan, the terms and conditions of which shall be established by the Secretary and the same as, or similar to, an income contingent repayment plan established for purposes of part D of this subchapter or an income-based repayment plan under section 1098e of this title, as the case may be.

(2) Loans for which income contingent or income-based repayment may be required

A loan made under this part may be required to be repaid under this subsection if the note or other evidence of the loan has been assigned to the Secretary pursuant to subsection (c)(8).

(n) Blanket certificate of loan guaranty

(1) In general

Subject to paragraph (3), any guaranty agency that has entered into or enters into any insurance program agreement with the Secretary under this part may—

(A) offer eligible lenders participating in the agency's guaranty program a blanket certificate of loan guaranty that permits the lender to make loans without receiving prior approval from the guaranty agency of individual loans for eligible borrowers enrolled in eligible programs at eligible institutions; and

(B) provide eligible lenders with the ability to transmit electronically data to the agency concerning loans the lender has elected to make under the agency's insurance program via standard reporting formats, with such reporting to occur at reasonable and standard intervals.

(2) Limitations on blanket certificate of guaranty

(A) An eligible lender may not make a loan to a borrower under this section after such lender receives a notification from the guaranty agency that the borrower is not an eligible borrower.

(B) A guaranty agency may establish limitations or restrictions on the number or volume of loans issued by a lender under the blanket certificate of guaranty.

(3) Participation level

During fiscal years 1999 and 2000, the Secretary may permit, on a pilot basis, a limited number of guaranty agencies to offer blanket certificates of guaranty under this subsection. Beginning in fiscal year 2001, any guaranty agency that has an insurance program agreement with the Secretary may offer blanket certificates of guaranty under this subsection.

(4) Report required

The Secretary shall, at the conclusion of the pilot program under paragraph (3), provide a report to the authorizing committees on the impact of the blanket certificates of guaranty on program efficiency and integrity.

(o) Armed Forces student loan interest payment program

(1) Authority

Using funds received by transfer to the Secretary under section 2174 of title 10 for the payment of interest and any special allowance on a 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",6 means a special allowance that is payable with respect to a loan under section 1087–1 of this title.

(Pub. L. 89–329, title IV, §428, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1367; amended Pub. L. 100–50, §10(a)–(c), (e)–(m), June 3, 1987, 101 Stat. 341–343; Pub. L. 100–203, title III, §§3001(b), 3002(b), 3003, Dec. 22, 1987, 101 Stat. 1330–38, 1330-39; Pub. L. 100–369, §§5(b)(2), 7(c), 11(a), July 18, 1988, 102 Stat. 836–838; Pub. L. 101–239, title II, §§2002(a)(2), (b)(1), 2004(b)(1), (3), 2006(b), Dec. 19, 1989, 103 Stat. 2111, 2116, 2118; Pub. L. 101–508, title III, §§3002, 3004(b), Nov. 5, 1990, 104 Stat. 1388–25, 1388-27; Pub. L. 102–26, §9, Apr. 9, 1991, 105 Stat. 128; Pub. L. 102–164, title VI, §§601(b), 602(b), 604, 605(b)(2), Nov. 15, 1991, 105 Stat. 1065, 1066, 1068; Pub. L. 102–325, title IV, §§411(b)(2), 416(a)–(e)(1), (f)–(p)(7), (q)–(t), July 23, 1992, 106 Stat. 510, 516-525, 527-529; Pub. L. 103–66, title IV, §§4041(a)(1), (2)(B), (b), 4043(a), 4044, 4045, 4102(c), 4107(a), (b), 4108(a), (b), 4110(a), 4112(a), 4201(a), Aug. 10, 1993, 107 Stat. 354, 355, 358, 359, 367-370; Pub. L. 103–82, title I, §102(c)(1), Sept. 21, 1993, 107 Stat. 823; Pub. L. 103–208, §2(c)(11)–(28), Dec. 20, 1993, 107 Stat. 2462–2465; Pub. L. 103–382, title III, §355(a), Oct. 20, 1994, 108 Stat. 3967; Pub. L. 105–33, title VI, §§6101(b), 6104(2), Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–244, title IV, §417(a)–(c)(1)(A), (2)–(k), Oct. 7, 1998, 112 Stat. 1682–1690; Pub. L. 107–314, div. A, title VI, §651(b), Dec. 2, 2002, 116 Stat. 2579; Pub. L. 109–171, title VIII, §§8004(b)(2), 8005(b), 8007(a), 8008(a), 8009(b)(1), 8014(a)(1), (b)(1), (c)(1), (d), (e), (j)(1)–(3), Feb. 8, 2006, 120 Stat. 158, 160, 162, 164, 168-171; Pub. L. 110–84, title II, §202(a), title III, §§301, 302(b)(1), 303(a), Sept. 27, 2007, 121 Stat. 791, 796, 797; Pub. L. 110–227, §§3(b), 5(a), May 7, 2008, 122 Stat. 742, 743; Pub. L. 110–315, title I, §103(b)(4), title IV, §§422(a)(1), (b)–(g)(1), (h)–(j), 424(b), 432(b)(2), 438(a)(2), Aug. 14, 2008, 122 Stat. 3088, 3227-3231, 3233, 3246, 3258; Pub. L. 110–350, §2, Oct. 7, 2008, 122 Stat. 3947; Pub. L. 111–39, title IV, §402(a)(1), (b)(1), (f)(1), July 1, 2009, 123 Stat. 1940, 1943; Pub. L. 111–152, title II, §2204, Mar. 30, 2010, 124 Stat. 1075; Pub. L. 112–74, div. F, title III, §309(d)(1), Dec. 23, 2011, 125 Stat. 1101; Pub. L. 114–113, div. H, title III, §311, Dec. 18, 2015, 129 Stat. 2638; Pub. L. 115–245, div. B, title III, §309(c), Sept. 28, 2018, 132 Stat. 3106.)

References in Text

The National and Community Service Act of 1990, referred to in subsec. (a)(2)(C)(ii)(II)(aa), is Pub. L. 101–610, Nov. 16, 1990, 104 Stat. 3127. Title I of the Act enacted subchapter I (§12511 et seq.) of chapter 129 of Title 42, The Public Health and Welfare, and amended sections 1070a–6 and 1087vv of this title. For complete classification of this Act to the Code, see Short Title note set out under section 12501 of Title 42 and Tables.

Section 1078–1 of this title, referred to in subsecs. (a)(2)(E) and (b)(1)(B), (Q), was repealed by Pub. L. 103–66, title IV, §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, §418, Oct. 7, 1998, 112 Stat. 1691.

The phrase " '95 percent' ", referred to in subsec. (c)(1)(D)(i), (E)(i), and (F)(i)(I) as appearing in "the fourth sentence of subparagraph (A)", no longer appears in subpar. (A) of subsec. (c)(1) after the amendment by Pub. L. 114–113.

The Higher Education Amendments of 1992, referred to in subsec. (c)(3)(A)(i)(I), is Pub. L. 102–325, July 23, 1992, 106 Stat. 448. For complete classification of this Act to the Code, see Short Title of 1992 Amendment note set out under section 1001 of this title and Tables.

The National and Community Service Trust Act of 1993, referred to in subsec. (c)(3)(A)(i)(III), is Pub. L. 103–82, Sept. 21, 1993, 107 Stat. 785. For complete classification of this Act to the Code, see Short Title of 1993 Amendment note set out under section 12501 of Title 42, The Public Health and Welfare, and Tables.

Codification

Amendments by section 2(c)(17), (26), (27) 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, Pub. L. 103–66, and Pub. L. 103–82, to reflect the probable intent of Congress.

Prior Provisions

A prior section 1078, Pub. L. 89–329, title IV, §428, Nov. 8, 1965, 79 Stat. 1240; Pub. L. 90–460, §§1(a)(2), 2(a)(2), (b)(1), (2), 3(b), Aug. 3, 1968, 82 Stat. 634–636; Pub. L. 90–575, title I, §§111(a), (b)(1), 112(b), 113(b)(3), (4), 115(a)(1)–(3), (b), 116(b)(3), 117(a), (b), 120(a)(1), (b), (c)(1), Oct. 16, 1968, 82 Stat. 1020–1027; Pub. L. 92–318, title I, §§132(b), 132A(b), 132C(a), (b), 132D(b)–(d), June 23, 1972, 86 Stat. 261–264; Pub. L. 93–269, §§2–4, Apr. 18, 1974, 88 Stat. 87, 89; Pub. L. 94–328, §2(b), June 30, 1976, 90 Stat. 727; Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2108; S. Res. 4, Feb. 4, 1977; Pub. L. 95–43, §1(a)(19)–(29), June 15, 1977, 91 Stat. 214–216; Pub. L. 95–566, §5(a)(2), (b)(1), (3)–(5), Nov. 1, 1978, 92 Stat. 2403; S. Res. 30, Mar. 7, 1979; Pub. L. 96–49, §5(b), Aug. 13, 1979, 93 Stat. 352; Pub. L. 96–374, title IV, §§411(b), 412(c), (d), (f), 413(b), (d), 414, 415(a)(3)–(5), (b)(2), 417, 423(a)(2), (b)–(d), title XIII, §1391(a)(1), (2), Oct. 3, 1980, 94 Stat. 1416–1420, 1422, 1432, 1503; Pub. L. 97–35, title V, §§532(a), (b)(1), 535(c), (d), 536(b), 537(a)(1), (b)(2), (c), (d)(1), (e)(2), Aug. 13, 1981, 95 Stat. 451, 452, 455-457; Pub. L. 98–79, §10(b), Aug. 15, 1983, 97 Stat. 484; Pub. L. 99–272, title XVI, §§16012(b), 16013(a), (c), (e)(2), (3), 16014(a)(1), (b)(1), (2) formerly (1), (3) formerly (2), 16015(b), 16016, 16018(a)(2), 16021, 16032(c), Apr. 7, 1986, 100 Stat. 340–343, 348, 349, 355, renumbered and amended, Pub. L. 99–320, §2(a), (b), May 23, 1986, 100 Stat. 491, related to Federal interest subsidy payments, prior to the general revision of this part by Pub. L. 99–498.

A prior section 1078a, Pub. L. 91–95, §2, Oct. 22, 1969, 83 Stat. 141; Pub. L. 92–318, title I, §134(a), June 23, 1972, 86 Stat. 270; Pub. L. 93–269, §5, Apr. 18, 1974, 88 Stat. 89; Pub. L. 94–328, §2(c), June 30, 1976, 90 Stat. 727; Pub. L. 94–482, title I, §127(c)(1), Oct. 12, 1976, 90 Stat. 2142, related to special allowances for insured student loans, prior to repeal by Pub. L. 94–482, title I, §127(c)(2), Oct. 12, 1976, 90 Stat. 2142.

Amendments

2018—Subsec. (b)(1)(M)(v). Pub. L. 115–245 added cl. (v).

2015—Subsec. (c)(1)(A). Pub. L. 114–113, which directed substitution of "100 percent" for "95 percent" in subsec. (c)(1), was executed by making the substitution the first time "95 percent" appeared to reflect the probable intent of Congress.

2011—Subsec. (a)(3)(A)(i)(I). Pub. L. 112–74 amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: "which accrues prior to the beginning of the repayment period of the loan, or".

2010—Subsec. (a)(1). Pub. L. 111–152, §2204(a)(1)(A), inserted "for which the first disbursement is made before July 1, 2010, and" after "eligible institution" in introductory provisions.

Subsec. (a)(5). Pub. L. 111–152, §2204(a)(1)(B), substituted "June 30, 2010." for "September 30, 2014, except that, in the case of a loan made or insured under a student loan or loan insurance program to enable a student who has obtained a prior loan made or insured under such program to continue his or her education program, such period shall end at the close of September 30, 2018."

Subsec. (b)(1)(G). Pub. L. 111–152, §2204(b), repealed Pub. L. 110–84, §303. See 2007 Amendment note below.

Subsec. (b)(1)(G)(ii). Pub. L. 111–152, §2204(a)(2)(A), inserted "and before July 1, 2010," after "July 1, 2006,".

Subsec. (b)(1)(H)(ii). Pub. L. 111–152, §2204(a)(2)(B), inserted "and that are first disbursed before July 1, 2010," after "July 1, 2006,".

Subsec. (f)(1)(A)(ii). Pub. L. 111–152, §2204(a)(3), struck out "during fiscal years beginning" after "originated" and inserted "and first disbursed before July 1, 2010," after "October 1, 2003,".

Subsec. (j)(1). Pub. L. 111–152, §2204(a)(4), inserted ", before July 1, 2010," after "section 1085(d)(1)(D) of this title shall".

2009—Subsec. (a)(2)(A)(i)(II). Pub. L. 111–39, §402(f)(1)(A), struck out "and" after semicolon at end.

Subsec. (b)(1)(G)(i). Pub. L. 111–39, §402(a)(1), which directed amendment of cl. (i), as amended by section 303 of Pub. L. 110–84, by striking "or 1087–2(q)", could not be executed because of the repeal of section 303 by Pub. L. 111–152, §2204(b). See 2010 Amendment note above and 2007 Amendment note below.

Subsec. (b)(1)(M)(i). Pub. L. 111–39, §402(f)(1)(B)(i), inserted "section" before "1078–2" in concluding provisions.

Subsec. (b)(3)(A)(i). Pub. L. 111–39, §402(f)(1)(B)(ii), substituted "any institution of higher education, any employee of an institution of higher education, or any individual or entity" for "any institution of higher education or the employees of an institution of higher education".

Subsec. (b)(3)(C), (D). Pub. L. 111–39, §402(b)(1), inserted "or 1092(l)" after "section 1092(b)".

Subsec. (b)(4). Pub. L. 111–39, §402(f)(1)(B)(iii), substituted "With respect to the graduate fellowship program referred to in paragraph (1)(M)(i)(II)," for "For the purpose of paragraph (1)(M)(i)(III) of this subsection,".

Subsec. (b)(7)(B). Pub. L. 111–39, §402(f)(1)(B)(iv)(I), struck out "clause (i) or (ii) of" before "subparagraph (A)".

Subsec. (b)(7)(D). Pub. L. 111–39, §402(f)(1)(B)(iv)(II), substituted "subparagraph (A)" for "subparagraph (A)(i)".

Subsec. (c)(9)(K). Pub. L. 111–39, §402(f)(1)(C), substituted "6 months" for "3 months".

2008—Subsec. (a)(2)(C). Pub. L. 110–315, §422(a)(1), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: "For the purpose of subparagraph (B) and this paragraph—

"(i) a student's cost of attendance shall be determined under section 1087ll of this title;

"(ii) a student's estimated financial assistance means, for the period for which the loan is sought—

"(I) the amount of assistance such student will receive under subpart 1 of part A of this subchapter (as determined in accordance with section 1091(b) of this title), subpart 3 of part A of this subchapter, and parts C and E;

"(II) any veterans' education benefits paid because of enrollment in a postsecondary education institution, including veterans' education benefits (as defined in section 1087vv(c) of this title, but excluding benefits described in paragraph (2)(E) of such section); plus

"(III) other scholarship, grant, or loan assistance, but excluding any national service education award or post-service benefit under title I of the National and Community Service Act of 1990; and

"(iii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F."

Subsec. (a)(5). Pub. L. 110–315, §422(b), substituted "2014" for "2012" and "2018" for "2016".

Subsec. (b)(1)(G)(i). Pub. L. 110–315, §438(a)(2)(A), struck out "or section 1087–2(q) of this title" before semicolon at end.

Subsec. (b)(1)(L)(i). Pub. L. 110–315, §422(e)(2), substituted "clause (ii), (iii), or (v)" for "clause (ii) or (iii)".

Subsec. (b)(1)(Y)(i). Pub. L. 110–315, §422(c)(1)(A), added cl. (i) and struck out former cl. (i) which read as follows: "the lender shall determine the eligibility of a borrower for a deferment described in subparagraph (M)(i) based on receipt of—

"(I) a request for deferment from the borrower and documentation of the borrower's eligibility for the deferment;

"(II) a newly completed loan application that documents the borrower's eligibility for a deferment; or

"(III) student status information received by the lender that the borrower is enrolled on at least a half-time basis; and".

Subsec. (b)(1)(Y)(iii). Pub. L. 110–315, §422(c)(1)(B), (C), added cl. (iii).

Subsec. (b)(2)(F)(i)(V) to (VII). Pub. L. 110–315, §422(c)(2), added subcls. (V) to (VII).

Subsec. (b)(3). Pub. L. 110–315, §422(d), amended par. (3) generally. Prior to amendment, text read as follows: "A guaranty agency shall not—

"(A) offer, directly or indirectly, premiums, payments, or other inducements to any educational institution or its employees in order to secure applicants for loans under this part;

"(B) offer, directly or indirectly, any premium, incentive payment, or other inducement to any lender, or any agent, employee, or independent contractor of any lender or guaranty agency, in order to administer or market loans made under this part (other than a loan made under section 1078–8 of this title or a loan made as part of a guaranty agency's lender-of-last-resort program) for the purpose of securing the designation of that guaranty agency as the insurer of such loans;

"(C) conduct unsolicited mailings of student loan application forms to students enrolled in secondary school or a postsecondary institution, or to parents of such students, except that applications may be mailed to borrowers who have previously received loans guaranteed under this part by the guaranty agency; or

"(D) conduct fraudulent or misleading advertising concerning loan availability.

"It shall not be a violation of this paragraph for a guaranty agency to provide assistance to institutions of higher education comparable to the kinds of assistance provided to institutions of higher education by the Department of Education."

Subsec. (b)(7)(C). Pub. L. 110–315, §424(b), substituted "section 1078–2 or 1078–3" for "section 1078–1 or 1078–3".

Pub. L. 110–227, §3(b), struck out ", 1078–2," after "section 1078–1".

Subsec. (b)(9)(A)(v). Pub. L. 110–315, §422(e)(1), added cl. (v).

Subsec. (c)(2)(H)(i). Pub. L. 110–315, §422(f)(1), substituted "default aversion" for "preclaims".

Subsec. (c)(3)(A)(iii). Pub. L. 110–315, §432(b)(2), substituted "consumer reporting agency" for "credit bureau organization".

Subsec. (c)(3)(C)(iii), (iv). Pub. L. 110–315, §422(f)(2), added cls. (iii) and (iv).

Subsec. (c)(9)(K). Pub. L. 110–315, §103(b)(4)(A), substituted "authorizing committees" for "House Committee on Education and the Workforce and the Senate Committee on Labor and Human Resources".

Subsec. (d). Pub. L. 110–315, §422(g)(1), inserted "and section 3937 of title 50" after "(other than this chapter" in introductory provisions.

Subsec. (e). Pub. L. 110–315, §422(h), struck out subsec. (e). Text read as follows: "At the time of offering a borrower a loan under this part, and at the time of offering the borrower the option of repaying a loan in accordance with this section, the lender shall provide the borrower with a notice that informs the borrower, in a form prescribed by the Secretary by regulation—

"(1) that all borrowers are eligible for income-sensitive repayment, including through loan consolidation under section 1078–3 of this title;

"(2) the procedures by which the borrower may elect income-sensitive repayment; and

"(3) where and how the borrower may obtain additional information concerning income-sensitive repayment."

Subsec. (g). Pub. L. 110–315, §103(b)(4)(B), substituted "authorizing committees" for "Committee on Labor and Human Resources of the Senate and the Committee on Education and the Workforce of the House of Representatives" in concluding provisions.

Subsec. (h). Pub. L. 110–315, §438(a)(2)(B), struck out subsec. (h) which related to lending by guaranty agencies.

Subsec. (j)(1). Pub. L. 110–227, §5(a)(1), after second sentence, inserted "No loan under section 1078, 1078–2, or 1078–8 of this title that is made pursuant to this subsection shall be made with interest rates, origination or default fees, or other terms and conditions that are more favorable to the borrower than the maximum interest rates, origination or default fees, or other terms and conditions applicable to that type of loan under this part."

Pub. L. 110–227, §5(a)(1), in first sentence, substituted "eligible students and parents who are otherwise unable to obtain loans under this part (except for consolidation loans under section 1078–3 of this title) or who attend an institution of higher education in the State that is designated under paragraph (4)" for "students eligible to receive interest benefits paid on their behalf under subsection (a) of this section who are otherwise unable to obtain loans under this part".

Subsec. (j)(2)(B). Pub. L. 110–227, §5(a)(2), inserted ", in the case of students and parents applying for loans under this subsection because of an inability to otherwise obtain loans under this part (except for consolidation loans under section 1078–3 of this title)," after "lender, nor".

Subsec. (j)(2)(C) to (E). Pub. L. 110–315, §438(a)(2)(C), inserted "and" at the end of subpar. (C), substituted period for "; and" at the end of subpar. (D), and struck out subpar. (E) which read as follows: "the guaranty agency notifies the Secretary when the guaranty agency believes or has reason to believe that the Secretary may need to exercise the Secretary's authority under section 1087–2(q) of this title."

Subsec. (j)(3)(C). Pub. L. 110–227, §5(a)(3), inserted "or designates an institution of higher education for participation in the program under this subsection under paragraph (4)" after "under this part" in first sentence and "or to eligible borrowers who attend an institution in the State that is designated under paragraph (4)" after "problems" in third sentence.

Subsec. (j)(4), (5). Pub. L. 110–227, §5(a)(4), added pars. (4) and (5).

Subsec. (j)(6). Pub. L. 110–350, §2(1), substituted "June 30, 2010" for "June 30, 2009".

Pub. L. 110–227, §5(a)(4), added par. (6).

Subsec. (j)(7). Pub. L. 110–350, §2(2), substituted "June 30, 2010" for "June 30, 2009".

Pub. L. 110–227, §5(a)(4), added par. (7).

Subsec. (j)(8), (9). Pub. L. 110–227, §5(a)(4), added pars. (8) and (9).

Subsec. (j)(9)(A)(ii). Pub. L. 110–350, §2(3)(A), substituted "June 30, 2011" for "June 30, 2010" in introductory provisions.

Pub. L. 110–315, §103(b)(4)(C), substituted "authorizing committees" for "Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Education and Labor of the House of Representatives" in introductory provisions.

Subsec. (j)(9)(A)(ii)(III). Pub. L. 110–350, §2(3)(B), substituted "June 30, 2010" for "June 30, 2009".

Subsec. (j)(9)(A)(iii). Pub. L. 110–350, §2(3)(C), substituted "July 1, 2011" for "July 1, 2010".

Pub. L. 110–315, §103(b)(4)(C), substituted "authorizing committees" for "Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Education and Labor of the House of Representatives" in introductory provisions.

Subsec. (k)(4). Pub. L. 110–315, §422(i), added par. (4).

Subsec. (m). Pub. L. 110–315, §422(j)(1), inserted "and income-based" after "Income contingent" in heading.

Subsec. (m)(1). Pub. L. 110–315, §422(j)(2), inserted "or income-based repayment plan" before ", the terms and conditions" and "or an income-based repayment plan under section 1098e of this title, as the case may be" before the period at end.

Subsec. (m)(2). Pub. L. 110–315, §422(j)(3), inserted "or income-based" after "income contingent" in heading.

Subsec. (n)(4). Pub. L. 110–315, §103(b)(4)(D), substituted "authorizing committees" for "Committee on Education and the Workforce of the House of Representatives and the Committee on Labor and Human Resources of the Senate".

2007—Subsec. (b)(1)(G). Pub. L. 110–84, §303(a), which directed the general amendment of subpar. (G), was repealed by Pub. L. 111–152, §2204(b).

Subsec. (b)(1)(M)(iii). Pub. L. 110–84, §202(a), struck out "not in excess of 3 years" before "during" in introductory provisions, substituted comma for "; or" at end of subcl. (II), and inserted concluding provisions.

Subsec. (c)(1)(D) to (H). Pub. L. 110–84, §302(b)(1), redesignated subpars. (E) to (H) as (D) to (G), respectively, and struck out former subpar. (D) which read as follows: "Reimbursements of losses made by the Secretary on loans submitted for claim by an eligible lender, servicer, or guaranty agency designated for exceptional performance under section 1078–9 of this title shall not be subject to additional review by the Secretary or repurchase by the guaranty agency for any reason other than a determination by the Secretary that the eligible lender, servicer, or guaranty agency engaged in fraud or other purposeful misconduct in obtaining designation for exceptional performance."

Subsec. (c)(6)(A)(ii). Pub. L. 110–84, §301, amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "an amount equal to 24 percent of such payments for use in accordance with section 1072b of this title, except that, beginning on October 1, 2003, this subparagraph shall be applied by substituting '23 percent' for '24 percent'."

2006—Subsec. (a)(3)(A)(v)(III). Pub. L. 109–171, §8014(j)(1), added subcl. (III).

Subsec. (a)(5). Pub. L. 109–171, §8004(b)(2), substituted "2012" and "2016" for "2004" and "2008", respectively.

Subsec. (b)(1)(A)(i)(I). Pub. L. 109–171, §8005(b)(1), substituted "$3,500" for "$2,625".

Subsec. (b)(1)(A)(ii)(I). Pub. L. 109–171, §8005(b)(2), substituted "$4,500" for "$3,500".

Subsec. (b)(1)(G). Pub. L. 109–171, §8014(a)(1), amended subpar. (G) generally. Prior to amendment, subpar. (G) read as follows: "insures 98 percent of the unpaid principal of loans insured under the program, except that such program shall insure 100 percent of the unpaid principal of loans made with funds advanced pursuant to subsection (j) of this section or section 1087–2(q) of this title;".

Subsec. (b)(1)(H). Pub. L. 109–171, §8014(b)(1), amended subpar. (H) generally. Prior to amendment, subpar. (H) read as follows: "provides for collection of a single insurance premium equal to not more than 1.0 percent of the principal amount of the loan, by deduction proportionately from each installment payment of the proceeds of the loan to the borrower, and insures that the proceeds of the premium will not be used for incentive payments to lenders;".

Subsec. (b)(1)(M)(iii), (iv). Pub. L. 109–171, §8007(a), added cl. (iii) and redesignated former cl. (iii) as (iv).

Subsec. (b)(1)(N)(ii), (iii). Pub. L. 109–171, §8008(a), added cls. (ii) and (iii) and struck out former cl. (ii), which read as follows: "in the case of a student who is studying outside the United States in a program of study abroad that is approved for credit by the home institution at which such student is enrolled or at an eligible foreign institution, are, at the request of the student, disbursed directly to the student by the means described in clause (i), unless such student requests that the check be endorsed, or the funds transfer authorized, pursuant to an authorized power-of-attorney;".

Subsec. (b)(7)(A). Pub. L. 109–171, §8009(b)(1), substituted "shall begin the day after 6 months after the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution)." for "shall begin—

"(i) the day after 6 months after the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution); or

"(ii) on an earlier date if the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier date."

Subsec. (c)(1)(A). Pub. L. 109–171, §8014(j)(2), substituted "30 days" for "45 days" in last sentence.

Subsec. (c)(1)(G), (H). Pub. L. 109–171, §8014(c)(1), added subpar. (G) and redesignated former subpar. (G) as (H) and realigned margin.

Subsec. (c)(2)(A). Pub. L. 109–171, §8014(d)(1), inserted "(i)" after "including" and added cl. (ii) before semicolon at end.

Subsec. (c)(2)(D). Pub. L. 109–171, §8014(d)(2), substituted "paragraph (6)(A)" for "paragraph (6)".

Subsec. (c)(3)(A)(i). Pub. L. 109–171, §8014(e)(1), in introductory provisions, struck out "in writing" after "on terms agreed to" and inserted "and documented in accordance with paragraph (10)" after "approval of the insurer".

Subsec. (c)(6). Pub. L. 109–171, §8014(d)(3), designated existing provisions as subpar. (A), redesignated former subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A), and added subpars. (B) and (C).

Subsec. (c)(10). Pub. L. 109–171, §8014(e)(2), added par. (10).

Subsec. (i)(1). Pub. L. 109–171, §8014(j)(3), substituted "10 days" for "21 days" in third sentence.

2002—Subsec. (c)(3)(A)(i)(IV). Pub. L. 107–314, §651(b)(1)(A), added subcl. (IV).

Subsec. (c)(3)(A)(ii)(II). Pub. L. 107–314, §651(b)(1)(B), inserted "or (IV)" after "(i)(II)".

Subsec. (c)(3)(C). Pub. L. 107–314, §651(b)(1)(C), added subpar. (C) and struck out former subpar. (C) which read as follows: "shall contain provisions that specify that the form of forbearance granted by the lender for purposes of this paragraph shall be the temporary cessation of payments, unless the borrower selects forbearance in the form of an extension of time for making payments, or smaller payments than were previously scheduled; and".

Subsec. (o). Pub. L. 107–314, §651(b)(2), added subsec. (o).

1998—Subsec. (a)(2)(A)(i). Pub. L. 105–244, §417(a)(1)(A), added subcls. (I) and (II) and struck out former subcls. (I) to (III) which read as follows:

"(I) sets forth such student's estimated cost of attendance (as determined under section 1087ll of this title);

"(II) sets forth such student's estimated financial assistance; and

"(III) sets forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 1078–7 of this title;".

Subsec. (a)(2)(B). Pub. L. 105–244, §417(a)(1)(B), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "For the purpose of clause (ii) of subparagraph (A), a student shall qualify for a portion of an interest payment under paragraph (1) if the eligible institution has provided the lender with a statement evidencing a determination of need for a loan (as determined under part F of this subchapter) and the amount of such need, subject to the provisions of subparagraph (D)."

Subsec. (a)(2)(C). Pub. L. 105–244, §417(a)(1)(C), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: "For the purpose of paragraph (1) and this paragraph—

"(i) a student's estimated financial assistance means, for the period for which the loan is sought, the amount of assistance such student will receive under subpart 1 of part A of this subchapter (as determined in accordance with section 1091(b) of this title), subpart 3 of part A of this subchapter, and parts C and E, and any veterans' education benefits paid because of enrollment in a postsecondary education institution, including veterans' education benefits (as defined in section 1087vv(c) of this title), plus other scholarship, grant, or loan assistance; and

"(ii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F."

Subsec. (a)(2)(F). Pub. L. 105–244, §417(a)(1)(D), struck out subpar. (F) which read as follows: "Except as provided in subparagraph (D), an eligible institution may refuse to certify a statement which permits a student to receive a loan under this part or to certify a loan amount that is less than the student's determination of need (as determined under part F of this subchapter), if the reason for such action is documented and provided in written form to each student so affected."

Subsec. (a)(5). Pub. L. 105–244, §417(a)(2), substituted "September 30, 2004" for "September 30, 2002" and "September 30, 2008" for "September 30, 2006".

Subsec. (b)(1)(A). Pub. L. 105–244, §417(b)(1)(A), inserted ", as defined in section 1088(a)(2) of this title," after "academic year" in introductory provisions.

Subsec. (b)(1)(A)(i)(I). Pub. L. 105–244, §417(b)(1)(B)(i), substituted "length; and" for "length (as determined under section 1088 of this title);".

Subsec. (b)(1)(A)(i)(II), (III). Pub. L. 105–244, §417(b)(1)(B)(ii), added subcl. (II) and struck out former subcls. (II) and (III) which read as follows:

"(II) $1,750, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(III) $875, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year;".

Subsec. (b)(1)(A)(vi). Pub. L. 105–244, §417(b)(1)(C)–(E), added cl. (vi).

Subsec. (b)(1)(D)(ii). Pub. L. 105–244, §417(b)(2), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "the repayment period of any insured loan may not exceed 10 years, and".

Subsec. (b)(1)(E). Pub. L. 105–244, §417(b)(3), amended subpar. (E) generally. Prior to amendment, subpar. (E) read as follows: "subject to subparagraphs (D) and (L), and except as provided by subparagraph (M), provides that—

"(i) not more than 6 months prior to the date on which the borrower's first payment is due, the lender shall offer the borrower of a loan made, insured, or guaranteed under this section or section 1078–1 of this title, the option of repaying the loan in accordance with a graduated or income-sensitive repayment schedule established by the lender and in accordance with regulations of the Secretary; and

"(ii) repayment of loans shall be in installments over a period of not less than 5 years (unless the student, during the 6 months immediately preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years commencing at the beginning of the repayment period determined under paragraph (7) of this subsection;".

Subsec. (b)(1)(G). Pub. L. 105–244, §417(b)(4), struck out "not less than" after "insures".

Subsec. (b)(1)(L)(i). Pub. L. 105–244, §417(b)(5), inserted "except as otherwise provided by a repayment plan selected by the borrower under clause (ii) or (iii) of paragraph (9)(A)," before "during any" and ", notwithstanding any payment plan under paragraph (9)(A)" after "due and payable".

Subsec. (b)(1)(M)(i)(I). Pub. L. 105–244, §417(b)(6)(A), inserted before semicolon ", except that no borrower, notwithstanding the provisions of the promissory note, shall be required to borrow an additional loan under this subchapter in order to be eligible to receive a deferment under this clause".

Subsec. (b)(1)(M)(ii). Pub. L. 105–244, §417(b)(6)(B), inserted before semicolon ", except that no borrower who provides evidence of eligibility for unemployment benefits shall be required to provide additional paperwork for a deferment under this clause".

Subsec. (b)(1)(U)(i)(I), (ii). Pub. L. 105–244, §417(b)(7)(A), substituted "emergency action," for "emergency action,,".

Subsec. (b)(1)(U)(iii)(I). Pub. L. 105–244, §417(b)(7)(B), inserted "that originates or holds more than $5,000,000 in loans made under this subchapter for any lender fiscal year (except that each lender described in section 1085(d)(1)(A)(ii)(III) of this title shall annually submit the results of an audit required by this clause)," before "at least once a year".

Subsec. (b)(1)(X). Pub. L. 105–244, §417(b)(8)(B)(i), substituted "subsection (c)(9)" for "subsection (c)(10)".

Subsec. (b)(1)(Y). Pub. L. 105–244, §417(b)(8)(A), (B)(ii), (C), added subpar. (Y).

Subsec. (b)(3). Pub. L. 105–244, §417(b)(9)(B), inserted concluding provisions.

Subsec. (b)(3)(C). Pub. L. 105–244, §417(b)(9)(A), added subpar. (C) and struck out former subpar. (C) which read as follows: "conduct unsolicited mailings to students enrolled in secondary school of student loan application forms; or".

Subsec. (b)(7)(D). Pub. L. 105–244, §417(b)(10), added subpar. (D).

Subsec. (b)(9). Pub. L. 105–244, §417(b)(11), added par. (9).

Subsec. (c)(1)(A). Pub. L. 105–244, §417(c)(1)(A)(i), substituted "95 percent" for "98 percent".

Subsec. (c)(1)(B)(i). Pub. L. 105–244, §417(c)(1)(A)(ii), substituted "85 percent" for "88 percent".

Subsec. (c)(1)(B)(ii). Pub. L. 105–244, §417(c)(1)(A)(iii), substituted "75 percent" for "78 percent".

Subsec. (c)(1)(E)(i). Pub. L. 105–244, §417(c)(1)(A)(iv)(I), substituted "95 percent" for "98 percent".

Subsec. (c)(1)(E)(ii). Pub. L. 105–244, §417(c)(1)(A)(iv)(II), substituted "85 percent" for "88 percent".

Subsec. (c)(1)(E)(iii). Pub. L. 105–244, §417(c)(1)(A)(iv)(III), substituted "75 percent" for "78 percent".

Subsec. (c)(1)(F)(i). Pub. L. 105–244, §417(c)(1)(A)(v)(I), substituted "95 percent" for "98 percent".

Subsec. (c)(1)(F)(ii). Pub. L. 105–244, §417(c)(1)(A)(v)(II), substituted "85 percent" for "88 percent".

Subsec. (c)(1)(F)(iii). Pub. L. 105–244, §417(c)(1)(A)(v)(III), substituted "75 percent" for "78 percent".

Subsec. (c)(2)(A). Pub. L. 105–244, §417(c)(2)(A), substituted "proof that the institution was contacted and other reasonable attempts were made" for "proof that reasonable attempts were made".

Subsec. (c)(2)(G). Pub. L. 105–244, §417(c)(2)(B), substituted "certifies to the Secretary that diligent attempts, including contact with the institution, have been made" for "certifies to the Secretary that diligent attempts have been made".

Subsec. (c)(2)(H)(ii). Pub. L. 105–244, §417(c)(3), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "the guaranty agency may require the payment by the institution of a reasonable fee (as determined in accordance with regulations prescribed by the Secretary) for such information; and".

Subsec. (c)(3)(A)(i). Pub. L. 105–244, §417(c)(4)(A), struck out "written" before "request" in introductory provisions.

Subsec. (c)(3)(D). Pub. L. 105–244, §417(c)(4)(B)–(D), added subpar. (D).

Subsec. (c)(6). Pub. L. 105–244, §417(c)(5), amended heading and text of par. (6) generally, revising and restating provisions relating to Secretary's equitable share.

Subsec. (c)(8). Pub. L. 105–244, §417(c)(6), redesignated subpar. (A) as entire par. and struck out subpar. (B) which read as follows: "An orderly transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this subchapter shall be deemed to be in the Federal fiscal interest, and a guaranty agency shall promptly assign loans to the Secretary under this paragraph upon the Secretary's request."

Subsec. (c)(9)(A). Pub. L. 105–244, §417(c)(7)(A), substituted "maintain in the agency's Federal Student Loan Reserve Fund established under section 1072a of this title a current minimum reserve level of at least 0.25 percent" for "maintain a current minimum reserve level of at least .5 percent".

Subsec. (c)(9)(C). Pub. L. 105–244, §417(c)(7)(B), substituted "85 percent pursuant to paragraph (1)(B)(i)" for "80 percent pursuant to subsection (c)(1)(B)(ii) of this section", struck out ", as appropriate," after "Secretary shall require", and substituted "45 working days" for "30 working days".

Subsec. (c)(9)(E)(iv). Pub. L. 105–244, §417(c)(7)(C)(i), inserted "or" at end.

Subsec. (c)(9)(E)(v). Pub. L. 105–244, §417(c)(7)(C)(ii), substituted a period for "; or" at end.

Subsec. (c)(9)(E)(vi). Pub. L. 105–244, §417(c)(7)(C)(iii), struck out cl. (vi) which read as follows: "the Secretary determines that such action is necessary to ensure an orderly transition from the loan programs under this part to the direct student loan programs under part D of this subchapter."

Subsec. (c)(9)(F)(vii). Pub. L. 105–244, §417(c)(7)(D), substituted "and to avoid disruption of the student loan program." for "to avoid disruption of the student loan program, and to ensure an orderly transition from the loan programs under this part to the direct student loan programs under part C of this subchapter."

Subsec. (c)(9)(I). Pub. L. 105–244, §417(c)(7)(E), inserted "that, if commenced after September 24, 1998, shall be on the record" after "for a hearing".

Subsec. (c)(9)(K). Pub. L. 105–244, §417(c)(7)(F), substituted "and the Workforce" for "and Labor" and struck out "and the progress of the transition from the loan programs under this part to the direct student loan programs under part D of this subchapter" after "guaranty agency system".

Subsec. (e). Pub. L. 105–244, §417(d), amended heading and text of subsec. (e) generally. Prior to amendment, subsec. (e) related to payments for lender referral services.

Subsec. (f). Pub. L. 105–244, §417(e), amended heading and text of subsec. (f) generally. Prior to amendment, subsec. (f) authorized the Secretary to make payments to guaranty agencies for fiscal years prior to fiscal year 1994 for certain administrative and other costs and provided for applications for such payments.

Subsec. (g). Pub. L. 105–244, §417(f), substituted "and the Workforce" for "and Labor" in concluding provisions.

Subsec. (j)(3). Pub. L. 105–244, §417(g)(1), struck out "during transition to direct lending" after "services" in heading.

Subsec. (j)(3)(A). Pub. L. 105–244, §417(g)(2), struck out "during the transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this subchapter" after "loan capital" and inserted "designated for a State" after "a guaranty agency" and "subparagraph (C) and" after "funds in accordance with".

Subsec. (j)(3)(C). Pub. L. 105–244, §417(g)(3), added subpar. (C).

Subsec. (l). Pub. L. 105–244, §417(h), amended heading and text of subsec. (l) generally. Prior to amendment, text read as follows:

"(1) Assistance required.—Upon receipt of a proper request from the lender, a guaranty agency having an agreement with the Secretary under subsection (c) of this section shall engage in preclaims assistance activities (as described in subsection (c)(6)(C)(i)(I) of this section) and supplemental preclaims assistance activities (as described in subsection (c)(6)(C) of this section) with respect to each loan covered by such agreement.

"(2) Payments for supplemental preclaims assistance.—The Secretary shall make payments in accordance with the provisions of this paragraph to any guaranty agency that engages in supplemental preclaims assistance (as defined in subsection (c)(6)(C) of this section) on a loan guaranteed under this part. For each loan on which such assistance is performed and for which a default claim is not presented to the guaranty agency by the lender on or before the 150th day after the loan becomes 120 days delinquent, such payment shall be equal to one percent of the total of the unpaid principal and the accrued unpaid interest of the loan."

Subsec. (m)(1). Pub. L. 105–244, §417(i), substituted "may require borrowers" for "shall require at least 10 percent of the borrowers".

Subsec. (n). Pub. L. 105–244, §417(k), added subsec. (n).

Pub. L. 105–244, §417(j), struck out heading and text of subsec. (n) which related to State share of default costs.

1997—Subsec. (a)(5). Pub. L. 105–33, §6104(2), substituted "September 30, 2002," for "September 30, 1998," and "September 30, 2006." for "September 30, 2002."

Subsec. (c)(9)(A). Pub. L. 105–33, §6101(b), struck out "for the fiscal year of the agency that begins in 1993" after "loans guaranteed by such agency" and struck out at end "The minimum reserve level shall increase to—

"(i) .7 percent of such total attributable amount for the fiscal year of the agency that begins in 1994;

"(ii) .9 percent of such total attributable amount for the fiscal year of the agency that begins in 1995; and

"(iii) 1.1 percent of such total attributable amount for each fiscal year of the agency that begins on or after January 1, 1996."

1994—Subsec. (c)(1)(G). Pub. L. 103–382 added subpar. (G).

1993—Subsec. (a)(2)(C)(i). Pub. L. 103–208, §2(c)(11), substituted "; and" for period at end.

Subsec. (a)(2)(E). Pub. L. 103–208, §2(c)(12), inserted "or 1078–8" after "1078–1".

Subsec. (b)(1)(A)(ii), (iii). Pub. L. 103–208, §2(c)(13)(A), added cls. (ii) and (iii) and struck out former cls. (ii) and (iii) which read as follows:

"(ii) in the case of a student who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate study—

"(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this title);

"(II) $2,325, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such academic year; and

"(III) $1,175, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such academic year;

"(iii) in the case of a student at an eligible institution who has successfully completed such first and second year but has not successfully completed the remainder of a program of undergraduate study—

"(I) $5,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this title);

"(II) $3,675, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(III) $1,825, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; and".

Subsec. (b)(1)(A)(iv), (v). Pub. L. 103–208, §2(c)(13)(B), (C), added cl. (iv) and redesignated former cl. (iv) as (v).

Subsec. (b)(1)(B). Pub. L. 103–208, §2(c)(14), substituted a semicolon for period at end of closing provisions.

Subsec. (b)(1)(D). Pub. L. 103–66, §4043(a)(1), substituted "be subject to income contingent repayment in accordance with subsection (m);" for "be subject to repayment in accordance with the regulations required by subsection (m) if the Secretary has published the finding required by paragraph (2) of such subsection;".

Subsec. (b)(1)(G). Pub. L. 103–66, §4108(b), substituted "98 percent" for "100 percent" and inserted before semicolon at end ", except that such program shall insure 100 percent of the unpaid principal of loans made with funds advanced pursuant to subsection (j) of this section or section 1087–2(q) of this title".

Subsec. (b)(1)(H). Pub. L. 103–66, §4102(c), substituted "1.0 percent" for "3 percent".

Subsec. (b)(1)(N). Pub. L. 103–208, §2(c)(15), amended subpar. (N) generally. Prior to amendment, subpar. (N) read as follows: "provides that funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except nothing in this subchapter shall be interpreted to allow the Secretary to require checks to be made co-payable to the institution and the borrower or to prohibit the disbursement of loan proceeds by means other than by check and except in the case of students who are studying outside the United States in a program of study abroad that is approved for credit by the home institution at which the student is enrolled, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney;".

Subsec. (b)(1)(U). Pub. L. 103–208, §2(c)(16), inserted a comma after "emergency action" in two places and substituted "this clause" for "this clause;" at end.

Subsec. (b)(1)(V). Pub. L. 103–208, §2(c)(17), redesignated subpar. (X) as (V) and struck out former subpar. (V) which related to procedure and requirements for granting a forbearance while a borrower is enrolled in a medical or dental internship or residency program. See Codification note above.

Subsec. (b)(1)(W). Pub. L. 103–208, §2(c)(17), redesignated subpar. (Y) as (W) and struck out former subpar. (W) which read as follows:

"(i) provides that, upon written request, a lender shall grant a borrower forbearance on such terms as are otherwise consistent with the regulations of the Secretary, during periods in which the borrower is serving in a national service position, for which the borrower receives a national service educational award under the National and Community Service Trust Act of 1993;

"(ii) provides that clauses (iii) and (iv) of subparagraph (V) shall also apply to a forbearance granted under this subparagraph; and

"(iii) provides that interest shall continue to accrue on a loan for which a borrower receives forbearance under this subparagraph and shall be capitalized or paid by the borrower;". See Codification note above.

Pub. L. 103–82, §102(c)(1)(A), added subpar. (W) and redesignated former subpar. (W) as (X).

Subsec. (b)(1)(X). Pub. L. 103–208, §2(c)(17)(B), redesignated subpar. (Z) as (X). Former subpar. (X) redesignated (V). See Codification note above.

Pub. L. 103–82, §102(c)(1)(A)(i), redesignated subpar. (W) as (X). Former subpar. (X) redesignated (Y).

Subsec. (b)(1)(Y). Pub. L. 103–208, §2(c)(17)(B), redesignated subpar. (Y) as (W). See Codification note above.

Pub. L. 103–82, §102(c)(1)(A)(i), redesignated subpar. (X) as (Y). Former subpar. (Y) redesignated (Z).

Subsec. (b)(1)(Z). Pub. L. 103–208, §2(c)(17)(B), redesignated subpar. (Z) as (X). See Codification note above.

Pub. L. 103–82, §102(c)(1)(A)(i), redesignated subpar. (Y) as (Z).

Subsec. (b)(2)(F)(i). Pub. L. 103–208, §2(c)(18), substituted "either jointly or separately to provide a notice" for "each to provide a separate notice".

Subsec. (b)(2)(F)(ii). Pub. L. 103–208, §2(c)(19)–(21), substituted "transferee" for "transferor" in introductory provisions, struck out "to another holder" after "the loan" in subcl. (I), and substituted "the new" for "such other" in subcl. (II).

Subsec. (b)(7). Pub. L. 103–208, §2(c)(22), amended par. (7) generally. Prior to amendment, par. (7) read as follows:

"(A) In the case of a loan made under section 1077 of this title or this section, the repayment period shall begin on the day immediately following the expiration of the 6-month period after the student ceases to carry at least one-half the normal full-time academic workload as determined by the institution, unless the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier point in time, and shall exclude any period of authorized deferment or forbearance.

"(B) In the case of a loan made under section 1078–1 or 1078–8 of this title, the repayment period shall begin on the day the loan is disbursed, or, if the loan is disbursed in multiple installments, on the day of the last such disbursement, and shall exclude any period of authorized deferment or forbearance.

"(C) In the case of a loan made under section 1078–2 or 1078–3 of this title, the repayment period shall begin on the day the loan is disbursed, and shall exclude any period of authorized deferment or forbearance."

Subsec. (b)(8). Pub. L. 103–208, §2(c)(23), added par. (8).

Subsec. (c)(1)(A). Pub. L. 103–208, §2(c)(24), substituted last sentence for former last sentence which read as follows: "In no case shall a guaranty agency file a claim under this subsection for reimbursement with respect to losses prior to 270 days after the loan becomes delinquent with respect to any installment thereon, or later than 45 days after the guaranty agency discharges its insurance obligation on the loan."

Pub. L. 103–66, §4108(a)(1), substituted "98 percent" for "100 percent" in fourth sentence.

Subsec. (c)(1)(B), (E), (F). Pub. L. 103–66, §4108(a)(2)–(4), in subpar. (B), substituted "88 percent" for "90 percent" in cl. (i) and "78 percent" for "80 percent" in cl. (ii), and added subpars. (E) and (F).

Subsec. (c)(2)(G). Pub. L. 103–208, §2(c)(25), substituted "certifies" for "demonstrates" before "to the Secretary".

Subsec. (c)(3)(A). Pub. L. 103–208, §2(c)(26), added subpar. (A) and struck out former subpar. (A) which read as follows: "shall contain provisions providing for forbearance in accordance with subparagraphs (V) and (W) of subsection (b)(1) of this section for the benefit of the student borrower serving in a medical or dental internship or residency program;". See Codification note above.

Pub. L. 103–82, §102(c)(1)(B), substituted "subparagraphs (V) and (W) of subsection (b)(1)" for "subsection (b)(1)(V)".

Subsec. (c)(6)(A)(ii). Pub. L. 103–66, §4110(a), substituted "27 percent" for "30 percent".

Subsec. (c)(8). Pub. L. 103–66, §4044, designated existing provisions as subpar. (A), struck out second and third sentences, and added subpar. (B). Prior to amendment, second and third sentences read as follows: "Prior to making such determination for any guaranty agency, the Secretary shall, in consultation with the guaranty agency, develop criteria to determine whether such agency has made adequate collections efforts. In determining whether a guaranty agency's collection efforts have met such criteria, the Secretary shall consider the agency's record of success in collecting on defaulted loans, the age of the loans, and the amount of recent payments received on the loans."

Subsec. (c)(9). Pub. L. 103–66, §4107(a), redesignated par. (10) as (9) and struck out former par. (9) which required guaranty agencies to pay reinsurance fees to the Secretary.

Subsec. (c)(10). Pub. L. 103–66, §4107(a)(2), redesignated par. (10) as (9).

Subsec. (c)(10)(C). Pub. L. 103–66, §4045(1), inserted ", as appropriate," after "the Secretary shall require".

Subsec. (c)(10)(D). Pub. L. 103–66, §4045(2), designated existing provisions as cl. (i), substituted "If the Secretary is not seeking to terminate the guaranty agency's agreement under subparagraph (E), or assuming the guaranty agency's functions under subparagraph (F), a" for "Each", and added cl. (ii).

Subsec. (c)(10)(E)(iv) to (vi). Pub. L. 103–66, §4045(3), added cls. (iv) to (vi).

Subsec. (c)(10)(F). Pub. L. 103–66, §4045(4)(A), substituted "If a guaranty" for "Except as provided in subparagraph (G), if a guaranty".

Subsec. (c)(10)(F)(v). Pub. L. 103–66, §4045(4)(B), amended cl. (v) generally. Prior to amendment, cl. (v) read as follows: "provide the guaranty agency with additional advance funds in accordance with section 1072(c)(7) of this title in order to meet immediate cash needs of the guaranty agency and ensure the uninterrupted payment of claims, with such restrictions on the use of such funds, as determined appropriate by the Secretary; or".

Subsec. (c)(10)(F)(vi), (vii). Pub. L. 103–66, §4045(4)(C), (D), in cl. (vi), substituted "to avoid" for "and to avoid" before "disruption of the student" and inserted before period at end ", and to ensure an orderly transition from the loan programs under this part to the direct student loan programs under part D of this subchapter", redesignated cl. (vi) as (vii), and added new cl. (vi).

Subsec. (c)(10)(G). Pub. L. 103–66, §4045(5), (7), added subpar. (G) and struck out former subpar. (G) which read as follows: "The Secretary may not take any action under subparagraph (E) or (F) against any guaranty agency that is backed by the full faith and credit of the State where such guaranty agency is the primary guarantor."

Subsec. (c)(10)(H) to (J). Pub. L. 103–66, §4045(6), (7), added subpar. (H) and redesignated former subpars. (H) and (I) as (I) and (J), respectively. Former subpar. (J) redesignated (K).

Subsec. (c)(10)(K). Pub. L. 103–66, §4045(6), (8), redesignated subpar. (J) as (K) and substituted "system and the progress of the transition from the loan programs under this part to the direct student loan programs under part D of this subchapter." for "system, together with recommendations for legislative changes, if necessary, for the maintenance of a strong guaranty agency system."

Subsec. (e)(1). Pub. L. 103–66, §4041(b)(1), amended heading, designated existing provisions as subpar. (A) and substituted "with which the Secretary has an agreement under subparagraph (B)" for "in any State", and added subpar. (B).

Subsec. (e)(2). Pub. L. 103–66, §4041(b)(2)(A), in introductory provisions, substituted "with which the Secretary has an agreement under paragraph (1)(B)" for "in a State".

Subsec. (e)(2)(A). Pub. L. 103–208, §2(c)(27), redesignated former cl. (i), subcl. (I) as (i) and former cl. (i), subcl. (II) as (ii) and struck out cl. (i) designation following subpar. (A) designation. See Codification note above.

Pub. L. 103–66, §4041(b)(2)(B), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "such student is either a resident of such State or is accepted for enrollment in or is attending an eligible institution in such State; and".

Subsec. (e)(3). Pub. L. 103–66, §4041(b)(3), substituted "From funds available for costs of transition under section 1087h of this title, the" for "The".

Subsec. (e)(5). Pub. L. 103–66, §4041(b)(4), struck out par. (5) which related to authorization of appropriations.

Subsec. (f)(1)(A). Pub. L. 103–66, §4107(b)(1), substituted "For a fiscal year prior to fiscal year 1994, the Secretary" for "The Secretary".

Subsec. (f)(1)(B). Pub. L. 103–66, §4107(b)(2), inserted "prior to fiscal year 1994" after "any fiscal year".

Subsec. (j)(2). Pub. L. 103–208, §2(c)(28), substituted "lender-of-last-resort" for "lender of last resort" in introductory provisions.

Subsec. (j)(2)(A) to (E). Pub. L. 103–66, §4041(a)(2)(B), in subpar. (A) inserted before semicolon "and ensure a response within 60 days after the student's original complete application is filed under this subsection", added subpar. (B), and redesignated former subpars. (B) to (D) as (C) to (E), respectively.

Subsec. (j)(3). Pub. L. 103–66, §4041(a)(1), added par. (3) consisting of subpars. (A) and (B), and struck out former par. (3) relating to limitation on lender-of-last-resort program, consisting of subpars. (A) to (C).

Subsec. (l)(2). Pub. L. 103–66, §4112(a), inserted second sentence and struck out former second sentence which read as follows: "Such payments shall be equal to $50.00 for each loan on which such assistance is performed and for which a default claim is not presented to the guaranty agency by the lender on or before the 150th day after the loan becomes 120 days delinquent."

Subsec. (m). Pub. L. 103–66, §4043(a)(2), amended par. (1) generally, added par. (2), and struck out former pars. (2) to (4). Prior to amendment, former pars. (1) to (4) related to establishment of terms and conditions, collection mechanism, loans for which income contingent repayment is required, and additional authority, respectively.

Subsec. (n). Pub. L. 103–66, §4201(a), added subsec. (n).

1992—Subsec. (a)(2)(C). Pub. L. 102–325, §416(a)(1), amended cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read as follows:

"(i) a student's estimated financial assistance means, for the period for which the loan is sought, the amount of assistance such student will receive under subpart 1 of part A of this subchapter (as determined in accordance with section 1091(b) of this title), subpart 2 of part A of this subchapter, and parts C and E of this subchapter, and any amount paid the student under chapters 32, 34, and 35 of title 38, plus other scholarship, grant, or loan assistance; and

"(ii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated by subtracting from the estimated cost of attendance at the eligible institution the total of the expected family contribution with respect to such student plus any estimated financial assistance reasonably available to such student."

Subsec. (a)(3)(A)(v). Pub. L. 102–325, §416(a)(2), added cl. (v).

Subsec. (a)(5). Pub. L. 102–325, §411(b)(2), substituted "September 30, 1998" for "September 30, 1992" and "September 30, 2002" for "September 30, 1997".

Subsec. (a)(7). Pub. L. 102–325, §416(a)(3), added par. (7).

Subsec. (b)(1)(A). Pub. L. 102–325, §416(b)(1)(A), inserted "or in a program of study abroad approved for credit by the eligible home institution at which such student is enrolled" in introductory provisions.

Subsec. (b)(1)(A)(i) to (iv). Pub. L. 102–325, §416(b)(1)(B), added cls. (i) to (iv) and struck out former cls. (i) to (iii) which read as follows:

"(i) $2,625, in the case of a student who has not successfully completed the first and second year of a program of undergraduate education;

"(ii) $4,000, in the case of a student who has successfully completed such first and second year but who has not successfully completed the remainder of a program of undergraduate education; and

"(iii) $7,500, in the case of a graduate or professional student (as defined in regulations of the Secretary);".

Subsec. (b)(1)(B). Pub. L. 102–325, §416(b)(2), which directed the amendment of subpar. (B) by striking clauses (i) and (ii) and inserting language which contained new cls. (i) and (ii) followed by concluding provisions, was executed by substituting the new cls. (i) and (ii) and concluding provisions for former cls. (i) and (ii) and former concluding provisions to reflect the probable intent of Congress. Prior to amendment, cls. (i) and (ii) and concluding provisions read as follows:

"(i) $17,250, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under section 1078–1 or 1078–2 of this title; and

"(ii) $54,750, in the case of any graduate or professional student (as defined by regulations of the Secretary and including any loans which are insured by the Secretary under this part, or by a guaranty agency, made to such student before the student became a graduate or professional student), excluding loans made under section 1078–1 or 1078–2 of this title;

except that the Secretary may increase the limit applicable to students who are pursuing programs which the Secretary determines are exceptionally expensive;".

Subsec. (b)(1)(D), (E). Pub. L. 102–325, §416(c)(1), amended subpars. (D) and (E) generally. Prior to amendment, subpars. (D) and (E) read as follows:

"(D) provides that (i) the student borrower shall be entitled to accelerate without penalty the whole or any part of an insured loan, (ii) except as provided in subparagraph (M) of this paragraph, the repayment period of any insured loan may not exceed 10 years, and (iii) the note or other written evidence of any loan, may contain such reasonable provisions relating to repayment in the event of default by the borrower as may be authorized by regulations of the Secretary in effect at the time such note or written evidence was executed;

"(E) subject to subparagraphs (D) and (L) of this paragraph and except as provided by subparagraph (M) of this paragraph, provides that repayment of loans shall be in installments over a period of not less than 5 years (unless the student, during the 6 months preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years beginning 6 months after the month in which the student ceases to carry at least one-half the normal full-time academic workload as determined by the institution;".

Subsec. (b)(1)(L)(i). Pub. L. 102–325, §416(d), substituted "(but in no instance less than the amount of interest due and payable)" for ", except that, in the case of a husband and wife, both of whom have such loans outstanding, the total of the combined payments for such a couple during any year shall not be less than $600 or the balance of all such loans, whichever is less".

Subsec. (b)(1)(M). Pub. L. 102–325, §416(e)(1), amended subpar. (M) generally, revising and restating as cls. (i) to (iii) provisions formerly contained in cls. (i) to (xi).

Subsec. (b)(1)(N). Pub. L. 102–325, §416(f), substituted "except in the case of students who are studying outside the United States in a program of study abroad that is approved for credit by the home institution at which the student is enrolled, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney;" for "except in the case of attendance at an institution outside the United States, the funds shall be delivered directly to the student;".

Subsec. (b)(1)(T). Pub. L. 102–325, §416(g), amended subpar. (T) generally. Prior to amendment, subpar. (T) read as follows: "provides no restrictions with respect to eligible institutions (other than nonresidential correspondence schools) which are more onerous than eligibility requirements for institutions under the Federal student loan insurance program as in effect on January 1, 1985, unless—

"(i) that institution is ineligible under regulations for the emergency action, limitation, suspension, or termination of eligible institutions under the Federal student loan insurance program or is ineligible pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility issued under the Federal student loan insurance program; or

"(ii) there is a State constitutional prohibition affecting the eligibility of such an institution;".

Subsec. (b)(1)(U)(iii). Pub. L. 102–325, §416(h), added cl. (iii).

Subsec. (b)(1)(V). Pub. L. 102–325, §416(i)(4), (5), added cls. (ii) and (iii) and redesignated former cl. (ii) as (iv).

Pub. L. 102–325, §416(i)(3), which directed the amendment of cl. (ii) by substituting a semicolon for a period at end, could not be executed because the period had been stricken by Pub. L. 102–164, §601(b)(2).

Pub. L. 102–325, §416(i)(1), (2), struck out "and" at end of cl. (i) and inserted "or (ii)" after "clause (i)" in two places in cl. (ii).

Subsec. (b)(1)(W) to (Y). Pub. L. 102–325, §416(j), added subpars. (W) to (Y) and struck out former subpars. (W) and (X) which related to credit reports, credit worthy cosigners, and authorizations for entry of judgments against borrowers in the event of default.

Subsec. (b)(2)(C). Pub. L. 102–325, §416(k)(1), substituted ", including financial information, as the Secretary may reasonably require to carry out the Secretary's functions under this part and protect the financial interest of the United States," for ", as the Secretary may reasonably require to carry out the Secretary's functions under this part,".

Subsec. (b)(2)(D)(i). Pub. L. 102–325, §416(k)(2)(A), substituted "on at least an annual basis" for "at least once every 2 years".

Subsec. (b)(2)(E). Pub. L. 102–325, §416(k)(3), designated existing provisions as cl. (i) and added cl. (ii).

Subsec. (b)(2)(F). Pub. L. 102–325, §416(k)(2)(B), (4), added subpar. (F).

Subsec. (b)(3)(B) to (D). Pub. L. 102–325, §416(l), added subpar. (B) and redesignated former subpars. (B) and (C) as (C) and (D), respectively.

Subsec. (b)(4). Pub. L. 102–325, §416(n), inserted at end sentence relating to requests for deferment of repayment by students engaged in fellowship-supported study outside the United States.

Pub. L. 102–325, §416(m), redesignated par. (5) as (4) and struck out former par. (4) which related to targeted teacher deferment rule.

Subsec. (b)(5). Pub. L. 102–325, §416(m)(2), redesignated par. (6) as (5). Former par. (5) redesignated (4).

Subsec. (b)(6). Pub. L. 102–325, §416(o), added par. (6). Former par. (6) redesignated (5).

Subsec. (b)(7). Pub. L. 102–325, §416(c)(2), added par. (7).

Subsec. (c)(1)(A). Pub. L. 102–325, §416(p)(1), substituted ", or later than 45 days after the guaranty agency discharges its insurance obligation on the loan." for period at end.

Subsec. (c)(1)(D). Pub. L. 102–325, §416(p)(2), added subpar. (D).

Subsec. (c)(2). Pub. L. 102–325, §416(p)(3), struck out "and" at end of subpar. (F), added subpars. (G) and (H), and redesignated former subpar. (G) as (I).

Subsec. (c)(3). Pub. L. 102–325, §416(p)(4), added subpar. (C) and concluding provisions and struck out former last sentence which read as follows: "Such regulations shall not preclude guaranty agencies from permitting the parties to such a loan from entering into a forbearance agreement solely because the loan is in default."

Subsec. (c)(7)(A). Pub. L. 102–325, §416(p)(5)(A), substituted "(1)(C)" for "(1)(B)" in introductory provisions and inserted "and ends before October 1, 1991" in cl. (i).

Subsec. (c)(7)(B). Pub. L. 102–325, §416(p)(5)(D), added subpar. (B). Former subpar. (B) redesignated (C).

Subsec. (c)(7)(C). Pub. L. 102–325, §416(p)(5)(B), (C), redesignated subpar. (B) as (C) and inserted "or (B)" after "(A)".

Subsec. (c)(8). Pub. L. 102–325, §416(p)(6), inserted provisions at end directing Secretary to develop criteria to determine whether agency has made adequate collection efforts and directing Secretary to consider certain factors in making determination.

Subsec. (c)(10). Pub. L. 102–325, §416(p)(7), added par. (10).

Subsec. (f)(1)(A)(i). Pub. L. 102–325, §416(q)(1), substituted "eligible lender" for "commercial lender".

Subsec. (f)(1)(C). Pub. L. 102–325, §416(q)(2), added subpar. (C).

Subsec. (j). Pub. L. 102–325, §416(r), designated existing provisions as par. (1), inserted par. heading, and added pars. (2) and (3).

Subsec. (k)(3). Pub. L. 102–325, §416(s), added par. (3).

Subsec. (m). Pub. L. 102–325, §416(t), added subsec. (m).

1991—Subsec. (a)(2)(A)(iii). Pub. L. 102–164, §602(b)(1), added cl. (iii). Amendment was executed by striking "and" at end of cl. (i)(III) to reflect the probable intent of Congress notwithstanding directory language directing the striking of "and" at end of cl. (i)(I).

Subsec. (a)(2)(F). Pub. L. 102–26 amended subpar. (F) generally. Prior to amendment, subpar. (F) read as follows: "Except as provided in subparagraph (D), an eligible institution may not, in carrying out the provisions of subparagraphs (A) and (B) of this paragraph, refuse to provide to any eligible lender which has an agreement under subsection (b) of this section with any guaranty agency, a statement which permits a student to receive any loan under this part, except that, in individual cases where the institution determines that the portion of the student's expenses to be covered by the loan can be met more appropriately, either by the institution or directly by the student, from other sources, the institution may refuse to provide such statement or may reduce the determination of need contained in such statement."

Subsec. (b)(1)(W). Pub. L. 102–164, §601(b), added subpar. (W).

Subsec. (b)(1)(X). Pub. L. 102–164, §604, added subpar. (X).

Subsec. (c)(6)(D). Pub. L. 102–164, §605(b)(2), struck out subpar. (D) which read as follows: "In the case of a State which enacts and enforces a garnishment law that complies with the requirements of section 1078–5 of this title, subparagraph (A)(ii) shall be applied by substituting '35 percent' for '30 percent'."

1990—Subsec. (a)(2)(F). Pub. L. 101–508, §3004(b), inserted before period at end ", except that, in individual cases where the institution determines that the portion of the student's expenses to be covered by the loan can be met more appropriately, either by the institution or directly by the student, from other sources, the institution may refuse to provide such statement or may reduce the determination of need contained in such statement".

Subsec. (c)(1)(A). Pub. L. 101–508, §3002(a)(1), struck out before period at end of first sentence ", including the administrative costs of supplemental preclaim assistance for default prevention as defined in paragraph (6)(C)".

Subsec. (c)(6)(C). Pub. L. 101–508, §3002(a)(2)–(5), in introductory provisions of cl. (i), substituted "subsection (l) of this section" for "this paragraph", in cl. (i)(I), substituted "generally comparable in intensiveness to the level of preclaims assistance performed, prior to the 120th day of delinquency, by the guaranty agency as of October 16, 1990" for "required or permitted under paragraph (2)(A) of this subsection and subsection (f) of this section", in cl. (ii), substituted "payment under subsection (l) of this section" for "reimbursement" and "described in division (i)(I) of this subparagraph" for "which the guaranty agency is required or permitted to provide pursuant to paragraph (2)(A) of this subsection and subsection (f) of this section", and in cl. (iv), struck out first sentence which read as follows: "The costs for each delinquent loan associated with carrying out this subparagraph may not exceed 2 percent of the outstanding principal balance of each such loan subject to the supplemental preclaims assistance authorized by this subparagraph or $100, whichever is less."

Subsec. (l). Pub. L. 101–508, §3002(b), added subsec. (l).

1989—Subsec. (a)(2)(A)(i)(III). Pub. L. 101–239, §2004(b)(1), added subcl. (III).

Subsec. (b)(1)(M)(i). Pub. L. 101–239, §2002(a)(2), inserted before semicolon at end ", except that no borrower shall be eligible for a deferment under this clause, or loan made under this part (other than a loan made under section 1078–2 or 1078–3 of this title), while serving in a medical internship or residency program".

Subsec. (b)(1)(O). Pub. L. 101–239, §2004(b)(3), amended subpar. (O) generally, substituting requirement that student loans be disbursed in accordance with section 1078–7 of this title for provisions requiring that certain loans be disbursed directly by lender in 2 or more installments, none exceeding more than one-half of the loan, or in installments pursuant to escrow provisions in subsec. (i).

Subsec. (b)(1)(T)(i). Pub. L. 101–239, §2006(b)(1), inserted "emergency action," after "regulations for the".

Subsec. (b)(1)(U). Pub. L. 101–239, §2006(b), in cl. (i) inserted "emergency action," after "regulations for the", and in cl. (ii) inserted "take emergency action," after "such program to".

Subsec. (b)(1)(V). Pub. L. 101–239, §2002(b)(1)(A), added subpar. (V).

Subsec. (c)(3). Pub. L. 101–239, §2002(b)(1)(B), amended par. (3) generally. Prior to amendment, par. (3) read as follows: "To the extent provided in regulations of the Secretary, a guaranty agreement under this subsection may contain provisions which permit such forbearance for the benefit of the student borrower as may be agreed upon by the parties to an insured loan and approved by the insurer. Such regulations shall not preclude guaranty agencies from permitting the parties to such a loan from entering into a forbearance agreement solely because the loan is in default."

1988—Subsec. (b)(1)(M)(v). Pub. L. 100–369, §7(c), substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954", which for purposes of codification was translated as "title 26" thus requiring no change in text.

Subsec. (b)(1)(M)(vii). Pub. L. 100–369, §11(a), inserted "after January 1, 1986," after "service".

Subsec. (b)(1)(O). Pub. L. 100–369, §5(b)(2), substituted "section 1078–2 or 1078–3" for "section 1078–1, 1078–2, or 1078–3".

1987—Subsec. (a)(2)(D). Pub. L. 100–50, §10(e), substituted "certifies the eligibility of any student" for "permits the student".

Subsec. (b)(1)(A)(i). Pub. L. 100–50, §10(f)(1), substituted "first and" for "first or".

Subsec. (b)(1)(B)(i). Pub. L. 100–50, §10(a)(1), inserted ", excluding loans made under section 1078–1 or 1078–2 of this title" after "undergraduate education".

Subsec. (b)(1)(B)(ii). Pub. L. 100–50, §10(a)(2), inserted ", excluding loans made under section 1078–1 or 1078–2 of this title" after "graduate or professional student)".

Subsec. (b)(1)(M)(vi). Pub. L. 100–50, §10(b)(1), inserted "nonprofit" before "private".

Subsec. (b)(1)(M)(vii). Pub. L. 100–50, §10(b)(2), inserted "or serving in an internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training" before semicolon at end.

Subsec. (b)(1)(N). Pub. L. 100–50, §10(f)(2), inserted "and except in the case of attendance at an institution outside the United States, the funds shall be delivered directly to the student" before semicolon at end.

Subsec. (b)(1)(O). Pub. L. 100–50, §10(c), substituted "$1,000 or more" for "more than $1,000".

Subsec. (b)(1)(O)(i). Pub. L. 100–50, §10(f)(3), substituted "being disbursed" for "being dispensed".

Subsec. (b)(1)(P). Pub. L. 100–50, §10(f)(4), added subpar. (P) and struck out former subpar. (P) which read as follows: "requires the borrower and the institution at which the borrower is in attendance to promptly notify the holder of the loan, directly or through the guaranty agency, concerning any change of address or status;".

Subsec. (b)(1)(T). Pub. L. 100–50, §10(f)(5), inserted "(other than nonresidential correspondence schools)" after "eligible institutions".

Subsec. (b)(5). Pub. L. 100–50, §10(g), substituted "paragraph (1)(M)(i)(III)" for "paragraph (1)(M)".

Subsec. (b)(6)(A). Pub. L. 100–50, §10(h)(1), substituted "Until such time as the Secretary has implemented section 1092b of this title and is able to provide to guaranty agencies the information required by such section" for "Prior to the implementation of section 1092b of this title".

Subsec. (b)(6)(B)(ii). Pub. L. 100–50, §10(h)(2), added cl. (ii) and struck out former cl. (ii) which read as follows: "the amount borrowed, the cumulative amount borrowed, the income reported on the loan application, and the purposes and the cost of attendance of the borrower."

Subsec. (c)(1)(A). Pub. L. 100–203, §3002(b)(1), substituted "shall be deemed" for "shall, subject to section 1072(e) of this title, be deemed".

Pub. L. 100–203, §3001(b)(1), substituted "shall, subject to section 1072(e) of this title, be deemed" for "shall be deemed".

Subsec. (c)(6)(C)(iv). Pub. L. 100–50, §10(i), inserted at end "In the case of accounts brought into repayment status as a result of performing supplemental preclaims assistance, the cost of such assistance is a permissible charge to the borrower (for the cost of collection) for which the borrower shall be liable."

Subsec. (c)(6)(D). Pub. L. 100–50, §10(j), inserted "and enforces" after "enacts".

Subsec. (c)(9)(A). Pub. L. 100–203, §3002(b)(2), substituted "an amount equal to" for "an amount, subject to section 1072(e) of this title, equal to" in introductory provisions.

Pub. L. 100–203, §3001(b)(2), substituted "an amount, subject to section 1072(e) of this title, equal to" for "an amount equal to" in introductory provisions.

Subsec. (c)(9)(A)(i), (ii). Pub. L. 100–50, §10(k)(1), inserted "covered" before "loans".

Subsec. (c)(9)(D). Pub. L. 100–50, §10(k)(2), added subpar. (D).

Subsec. (f)(1)(B). Pub. L. 100–203, §3002(b)(3), substituted "shall be deemed" for "shall, subject to section 1072(e) of this title, be deemed".

Pub. L. 100–203, §3001(b)(3), substituted "shall, subject to section 1072(e) of this title, be deemed" for "shall be deemed".

Subsec. (i)(1). Pub. L. 100–50, §10(l), struck out "multiple" after "authorizing" and substituted "21 days" for "45 days".

Subsec. (j). Pub. L. 100–50, §10(m), inserted provision at end that the guaranty agency consider the request of an eligible lender to serve as the lender-of-last-resort pursuant to this subsection.

Subsec. (k)(1). Pub. L. 100–203, §3003, substituted "Notwithstanding any other provision of law, in" for "In", "guaranty agency shall" for "guaranty agency may", and "subsection shall include" for "subsection may include".

Effective Date of 2018 Amendment

Amendment by Pub. L. 115–245 applicable with respect to loans made on or after Sept. 28, 2018, or in repayment on Sept. 28, 2018, see section 309(f) of Pub. L. 115–245, set out as a note under section 1077 of this title.

Effective Date of 2011 Amendment

Pub. L. 112–74, div. F, title III, §309(d)(2), Dec. 23, 2011, 125 Stat. 1101, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to new Federal Direct Stafford Loans made on or after July 1, 2012 and before July 1, 2014."

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), except as otherwise provided, see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Pub. L. 111–39, title IV, §402(a)(2), July 1, 2009, 123 Stat. 1940, provided that: "The amendment made by paragraph (1) [amending this section] shall be effective as if enacted as part of the amendment in [former] section 303(a) of the College Cost Reduction and Access Act (Public Law 110–84) [amending this section], shall take effect on October 1, 2012, and shall apply with respect to loans made on or after such date."

Effective Date of 2008 Amendment

Pub. L. 110–315, title IV, §422(a)(2), Aug. 14, 2008, 122 Stat. 3228, provided that: "The amendments made by paragraph (1) [amending this section] shall take effect on July 1, 2010."

Pub. L. 110–315, title IV, §422(g)(3), Aug. 14, 2008, 122 Stat. 3231, provided that: "The amendment made by paragraph (1) [amending this section] shall take effect on the date of enactment of this Act [Aug. 14, 2008], and the amendment made by paragraph (2) [amending section 1087–1 of this title] shall take effect for loans for which the first disbursement is made on or after July 1, 2008."

Pub. L. 110–315, title IV, §424(c), Aug. 14, 2008, 122 Stat. 3233, provided that: "The amendments made by this section [amending this section and section 1078–2 of this title] shall take effect for loans for which the first disbursement is made on or after July 1, 2008."

Pub. L. 110–227, §3(c), May 7, 2008, 122 Stat. 742, provided that: "The amendments made by this section [amending this section and section 1078–2 of this title] shall be effective for loans first disbursed on or after July 1, 2008."

Pub. L. 110–227, §5(b), May 7, 2008, 122 Stat. 746, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the date of enactment of this Act [May 7, 2008]."

Effective Date of 2007 Amendment

Amendment by sections 202(a), (d) and 301 of Pub. L. 110–84 effective Oct. 1, 2007, see section 1(c) of Pub. L. 110–84, set out as a note under section 1070a of this title.

Pub. L. 110–84, title III, §302(c), Sept. 27, 2007, 121 Stat. 796, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 1087–1 of this title and repealing section 1078–9 of this title] shall be effective on October 1, 2007, except that section 428I of the Higher Education Act of 1965 [20 U.S.C. 1078–9] (as in effect on the day before the date of enactment of this Act [Sept. 27, 2007]) shall apply to eligible lenders that received a designation under subsection (a) of such section prior to October 1, 2007, for the remainder of the year for which the designation was made."

Pub. L. 110–84, title III, §303(b), Sept. 27, 2007, 121 Stat. 797, which provided that amendment by former section 303(a) of Pub. L. 110–84 (amending this section) would be effective on Oct. 1, 2012, and applicable with respect to loans made on or after such date, was repealed by Pub. L. 111–152, title II, §2204(b), Mar. 30, 2010, 124 Stat. 1075.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Amendment by section 8005(b) of Pub. L. 109–171 effective July 1, 2007, see section 8005(e) of Pub. L. 109–171, set out as a note under section 1075 of this title.

Pub. L. 109–171, title VIII, §8007(f), Feb. 8, 2006, 120 Stat. 161, as amended by Pub. L. 110–84, title II, §202(d), Sept. 27, 2007, 121 Stat. 792, provided that: "The amendments made by this section [amending this section and sections 1087e, 1087dd, and 1088 of this title] shall apply with respect to all loans under title IV of the Higher Education Act of 1965 [20 U.S.C. 1070 et seq.]."

Pub. L. 109–171, title VIII, §8014(a)(2), Feb. 8, 2006, 120 Stat. 168, provided that: "The amendment made by this subsection [amending this section] shall apply with respect to loans for which the first disbursement of principal is made on or after July 1, 2006."

Pub. L. 109–171, title VIII, §8014(c)(2), Feb. 8, 2006, 120 Stat. 170, provided that: "The amendments made by this subsection [amending this section] shall apply with respect to loans for which the first disbursement of principal is made on or after July 1, 2006."

Effective Date of 2002 Amendment

Amendment by Pub. L. 107–314 applicable with respect to interest, and any special allowance under section 1087–1 of this title, that accrue for months beginning on or after Oct. 1, 2003, on student loans described in section 2174(c) of Title 10, Armed Forces, that were made before, on, or after such date to members of the Armed Forces who are on active duty (as defined in section 101(d) of Title 10) on or after that date, see section 651(e) of Pub. L. 107–314, set out as an Effective Date note under section 2174 of Title 10.

Effective Date of 1998 Amendment

Amendment by section 417(a), (b), (c)(2)–(k) 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.

Pub. L. 105–244, title IV, §417(c)(1)(B), Oct. 7, 1998, 112 Stat. 1687, provided that: "The amendments made by subparagraph (A) of this paragraph [amending this section] apply to loans for which the first disbursement is made on or after October 1, 1998."

Effective Date of 1994 Amendment

Pub. L. 103–382, title III, §355(b), Oct. 20, 1994, 108 Stat. 3967, provided that: "Subsection (a) [amending this section] and the amendment made by subsection (a) shall take effect on August 10, 1993."

Effective Date of 1993 Amendments

Amendment by section 2(c)(11), (12), (14)–(17), (22)–(28) of Pub. L. 103–208 effective as if included in the Higher Education Amendments of 1992, Pub. L. 102–325, except as otherwise provided, amendment by section 2(c)(13)(A) of Pub. L. 103–208 effective on and after July 1, 1994, amendment by section 2(c)(13)(B), (C) and (18) of Pub. L. 103–208 effective on and after Dec. 20, 1993, and amendment by section 2(c)(19)–(21) of Pub. L. 103–208 effective on and after 30 days after Dec. 20, 1993, see section 5(a), (b)(2), (3), (6) of Pub. L. 103–208, set out as a note under section 1051 of this title.

Amendment by Pub. L. 103–82 effective Oct. 1, 1993, see section 123 of Pub. L. 103–82, set out as a note under section 1701 of Title 16, Conservation.

Pub. L. 103–66, title IV, §4043(b), Aug. 10, 1993, 107 Stat. 358, provided that: "The amendments made by this section [amending this section] shall take effect on July 1, 1994."

Pub. L. 103–66, title IV, §4102(d), Aug. 10, 1993, 107 Stat. 367, provided that: "The amendments made by this section [amending this section and sections 1078–8 and 1087–1 of this title] shall take effect on July 1, 1994."

Pub. L. 103–66, title IV, §4107(c), Aug. 10, 1993, 107 Stat. 369, provided that: "The amendments made by this section [amending this section] shall take effect on October 1, 1993."

Pub. L. 103–66, title IV, §4108(c), Aug. 10, 1993, 107 Stat. 369, provided that: "The amendments made by this section [amending this section] shall apply to any loan for which the first disbursement is made on or after October 1, 1993."

Pub. L. 103–66, title IV, §4110(b), Aug. 10, 1993, 107 Stat. 370, provided that: "The amendment made by subsection (a) [amending this section] shall take effect on October 1, 1993."

Pub. L. 103–66, title IV, §4112(b), Aug. 10, 1993, 107 Stat. 370, provided that: "The amendment made by this section [amending this section] shall take effect on October 1, 1993."

Pub. L. 103–66, title IV, §4201(b), Aug. 10, 1993, 107 Stat. 371, provided that: "The amendment made by this section [amending this section] shall take effect on October 1, 1994."

Effective Date of 1992 Amendment

Pub. L. 102–325, title IV, §432, July 23, 1992, 106 Stat. 562, as amended by Pub. L. 103–208, §2(k)(5), Dec. 20, 1993, 107 Stat. 2486, provided that:

"(a) In General.—The changes made in part B of title IV of the Act [20 U.S.C. 1071 et seq.] by the amendments made by this part [part B (§§411–432) of title IV of Pub. L. 102–325, see Tables for classification] shall take effect on the date of enactment of this Act [July 23, 1992], except—

"(1) as otherwise provided in such part B;

"(2) that the changes made in sections 425(a), 428(b)(1)(A), 428(b)(1)(B), 428A(b), 428B(b) [20 U.S.C. 1075(a), 1078(b)(1)(A), (B), 1078–1(b), 1078–2(b)], relating to annual and aggregate loan limits, shall apply with respect to loans for which the first disbursement is made on or after July 1, 1993, except that—

"(A) the changes made in section 425(a)(1)(A)(i) and 428(b)(1)(A)(i) shall apply with respect to loans for which the first disbursement is made on or after October 1, 1992; and

"(B) the changes made in section 425(a)(1)(A)(iv) and 428(b)(1)(A)(iv) shall apply with respect to loans to cover the costs of instruction for periods of enrollment beginning on or after October 1, 1993;

"(3) that the changes made in sections 427(a)(2)(C), 428(b)(1)(M), and 428B(d)(1) [20 U.S.C. 1077(a)(2)(C), 1078(b)(1)(M), 1078–2(d)(1)], relating to deferments, shall apply with respect to loans for which the first disbursement is made on or after July 1, 1993, to an individual who is a new borrower on the date such individual applies for a loan;

"(4) that the changes made in sections 428(a)(7) and 428(f)(1)(C), relating to payments for unconsummated loans, shall apply with respect to loans made on or after October 1, 1992;

"(5) that the changes made in sections 427(a)(2)(H) and 428(b)(1)(E)(i), relating to offering graduated or income sensitive repayment options, shall apply with respect to loans for which the first disbursement is made on or after July 1, 1993, to an individual who is a new borrower on the date such individual applies for a loan;

"(6) that the changes made in section 428(b)(4), relating to teacher deferment, shall apply with respect to loans for which the first disbursement is made on or after July 1, 1993, to an individual who is a new borrower on the date such individual applies for a loan;

"(7) that section 428(c)(2)(H)(i) as added by such amendments shall be effective on and after October 1, 1992;

"(8) that the changes in section 428(c)(3) with respect to forbearance after a default shall be effective on and after October 1, 1992;

"(9) that the changes made in section 428B(a) [20 U.S.C. 1078–2(a)] with respect to use of credit histories shall apply with respect to loans for which the first disbursement is made on or after July 1, 1993;

"(10) that section 428B(c) as added by such amendments, relating to disbursement of Federal PLUS Loans, shall apply with respect to loans for which the first disbursement is made on or after October 1, 1992;

"(11) that the changes made in section 428C [20 U.S.C. 1078–3], relating to consolidation loans, shall apply with respect to loans under such section for which the application is received by an eligible lender on or after January 1, 1993;

"(12) that section 428H [20 U.S.C. 1078–8] as added by such amendments shall be effective with respect to loans made to cover the cost of instruction for periods of enrollment beginning on or after October 1, 1992;

"(13) that the changes made in section 438 [20 U.S.C. 1087–1] shall apply with respect to loans for which the first disbursement is made on or after October 1, 1992;

"(14) that the changes in section 439(d)(1) [20 U.S.C. 1087–2(d)(1)], relating to facilities loans, shall apply with respect to applications received on or after July 1, 1992; and

"(15) that the changes in the designation or names of loans or programs under part B is [sic] effective with respect to applications or other documents (used in making such loans) that are printed after the date of enactment of this Act.

"(b) New Borrowers.—For purposes of the section, the term 'new borrower' means, with respect to any date, an individual who on that date has no outstanding balance of principal or interest owing on any loan made, insured, or guaranteed under part B of title IV of the Act [20 U.S.C. 1071 et seq.]."

Effective Date of 1989 Amendment

Amendment by section 2002(a)(2) of Pub. L. 101–239 applicable to any loan made, insured, or guaranteed under this part or part E of this subchapter, including a loan made before Dec. 19, 1989, and amendment effective Jan. 1, 1990, but inapplicable with respect to any portion of a period of deferment granted to a borrower under section 1077(a)(2)(C)(i), 1078(b)(1)(M)(i), or 1087dd(c)(2)(A)(i) of this title for service in a medical internship or residency program completed prior to Dec. 19, 1989, see section 2002(a)(4) of Pub. L. 101–239, set out as a note under section 1077 of this title.

Pub. L. 101–239, title II, §2002(b)(2), Dec. 19, 1989, 103 Stat. 2112, provided that: "The amendments made by this subsection [amending this section] shall apply with respect to loans made before, on, or after the date of enactment of this Act [Dec. 19, 1989]."

Amendment by section 2004(b)(1), (3) of Pub. L. 101–239 applicable with respect to loans made to cover the cost of instruction for periods of enrollment beginning on or after Jan. 1, 1990, see section 2004(c) of Pub. L. 101–239, set out as a note under section 1077 of this title.

Effective Date of 1988 Amendment

Amendment by section 11(a) of Pub. L. 100–369 applicable with respect to loans made, insured or guaranteed under this part on, before, or after June 3, 1987, see section 11(b) of Pub. L. 100–369, set out as a note under section 1077 of this title.

Amendment by section 5(b)(2) of Pub. L. 100–369 effective with respect to loans made on or after Oct. 1, 1988, and amendment by section 7(c) of Pub. L. 100–369 effective July 18, 1988, see section 13(b) of Pub. L. 100–369, set out as a note under section 1091 of this title.

Effective Date of 1987 Amendments

Pub. L. 100–203, title III, §3002(b)(1)–(3), Dec. 22, 1987, 101 Stat. 1330–38, provided in part that the amendments by section 3002(b)(1)–(3) of Pub. L. 100–203 are effective Sept. 30, 1989.

Amendment by section 10(b) of Pub. L. 100–50 applicable with respect to loans made, insured or guaranteed under this part on, before, or after June 3, 1987, see section 11(b) of Pub. L. 100–369, set out as an Effective Date of 1988 Amendment note under section 1077 of this title.

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 effective Oct. 17, 1987, with subsection (b)(1)(M) (except cls. (viii), (ix), and (x)) applicable only to loans to new borrowers made to cover the costs of instruction for periods of enrollment beginning on or after July 1, 1987, or disbursed on or after July 1, 1987, subsection (b)(1)(A) and (B) applicable with respect only to loans disbursed on or after Jan. 1, 1987, or made to cover the costs of instruction for periods of enrollment beginning on or after Jan. 1, 1987, and subsection (b)(1)(H) applicable with respect only to loans for which the borrower files an application on or after July 1, 1987, see section 402(b) of Pub. L. 99–498, set out as a note under section 1071 of this title.

Construction of 2006 Amendment

Pub. L. 109–171, title VIII, §8007(e), Feb. 8, 2006, 120 Stat. 161, provided that: "Nothing in the amendments made by this section [amending this section and sections 1087e, 1087dd, and 1088 of this title] shall be construed to authorize any refunding of any repayment of a loan."

Review of Inducements Limitations

Pub. L. 110–227, §5(c), May 7, 2008, 122 Stat. 746, provided that: "Within 90 days after the date of enactment of this Act [May 7, 2008], the Secretary of Education shall review, and as necessary revise, the Department of Education's regulations concerning prohibited guaranty agency inducements to eligible lenders (34 CFR 682.401(e)) to ensure that such agencies do not engage in improper inducements in the expansion of operations of the lender-of-last-resort program as authorized by the amendments made by this section [amending this section]. The Secretary shall submit a report on the review and revision required by this subsection to the Committee on Education and Labor [now Committee on Education and the Workforce] of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate within 180 days after such date of enactment."

Guaranteed Student Loan Family Contribution Schedule for the Periods of Instruction Beginning After June 30, 1983

Pub. L. 97–301, §9, Oct. 13, 1982, 96 Stat. 1403, as amended by Pub. L. 98–79, §4(b), Aug. 15, 1983, 97 Stat. 481; Pub. L. 98–511, title VII, §707(7), (8), Oct. 19, 1984, 98 Stat. 2407, 2408; Pub. L. 99–272, title XVI, §16018(b), Apr. 7, 1986, 100 Stat. 348; Pub. L. 99–498, title IV, §408(a)(6), (7), Oct. 17, 1986, 100 Stat. 1495, specified that the family contribution schedule for specific periods of instruction through June 30, 1988, for loans made, insured, or guaranteed under this part be the family contribution schedule for such loans for the period of instruction from July 1, 1982, through June 30, 1983, and required the family contribution schedule for the period of instruction from July 1, 1982, through June 30, 1983, to be modified by the Secretary of Education for use for each of the specific periods of instruction to reflect the most recent and relevant data, prior to repeal by Pub. L. 99–498, title IV, §408(b), Oct. 17, 1986, 100 Stat. 1495, effective with respect to any academic year beginning on or after July 1, 1988, Pub. L. 97–301.

1 See References in Text note below.

2 So in original. The period probably should be a semicolon.

3 So in original.

4 So in original. No par. (2) has been enacted.

5 So in original. Probably should be "subsection."

6 So in original. The comma probably should not appear.

§1078–1. Voluntary flexible agreements with guaranty agencies

(a) Voluntary agreements

(1) Authority

Subject to paragraph (2),1 the Secretary may enter into a voluntary, flexible agreement with a guaranty agency under this section, in lieu of agreements with a guaranty agency under subsections (b) and (c) of section 1078 of this title. The Secretary may waive or modify any requirement under such subsections, except that the Secretary may not waive—

(A) any statutory requirement pertaining to the terms and conditions attached to student loans or default claim payments made to lenders;

(B) the prohibitions on inducements contained in section 1078(b)(3) of this title; or

(C) the Federal default fee required by section 1078(b)(1)(H) of this title and the second sentence of section 1078–8(h) of this title.

(2) Eligibility

During fiscal years 1999, 2000, and 2001, the Secretary may enter into a voluntary, flexible agreement with not more than 6 guaranty agencies that had 1 or more agreements with the Secretary under subsections (b) and (c) of section 1078 of this title as of the day before October 7, 1998. Beginning in fiscal year 2002, any guaranty agency or consortium thereof may enter into a voluntary flexible agreement with the Secretary.

(3) Report required

(A) In general

The Secretary, in consultation with the guaranty agencies operating under voluntary flexible agreements, shall report on an annual basis to the authorizing committees regarding the program outcomes that the voluntary flexible agreements have had with respect to—

(i) program integrity and program and cost efficiencies, delinquency prevention, and default aversion, including a comparison of such outcomes to such outcomes for each guaranty agency operating under an agreement under subsection (b) or (c) of section 1078 of this title;

(ii) consumer education programs described in section 1083a of this title; and

(iii) the availability and delivery of student financial aid.

(B) Contents

Each report described in subparagraph (A) shall include—

(i) a description of each voluntary flexible agreement and the performance goals established by the Secretary for each agreement;

(ii) a list of—

(I) guaranty agencies operating under voluntary flexible agreements;

(II) the specific statutory or regulatory waivers provided to each such guaranty agency; and

(III) any other waivers provided to other guaranty agencies under paragraph (1);


(iii) a description of the standards by which each guaranty agency's performance under the guaranty agency's voluntary flexible agreement was assessed and the degree to which each guaranty agency achieved the performance standards;

(iv) an analysis of the fees paid by the Secretary, and the costs and efficiencies achieved under each voluntary flexible agreement; and

(v) an identification of promising practices for program improvement that could be replicated by other guaranty agencies.

(b) Terms of agreement

An agreement between the Secretary and a guaranty agency under this section—

(1) shall be developed by the Secretary, in consultation with the guaranty agency, on a case-by-case basis;

(2) may only include provisions—

(A) specifying the responsibilities of the guaranty agency under the agreement, with respect to—

(i) administering the issuance of insurance on loans made under this part on behalf of the Secretary;

(ii) monitoring insurance commitments made under this part;

(iii) default aversion activities;

(iv) review of default claims made by lenders;

(v) payment of default claims;

(vi) collection of defaulted loans;

(vii) adoption of internal systems of accounting and auditing that are acceptable to the Secretary, and reporting the result thereof to the Secretary in a timely manner, and on an accurate, and auditable basis;

(viii) timely and accurate collection and reporting of such other data as the Secretary may require to carry out the purposes of the programs under this subchapter;

(ix) monitoring of institutions and lenders participating in the program under this part; and

(x) informational outreach to schools and students in support of access to higher education;


(B) regarding the fees the Secretary shall pay, in lieu of revenues that the guaranty agency may otherwise receive under this part, to the guaranty agency under the agreement, and other funds that the guaranty agency may receive or retain under the agreement, except that in no case may the cost to the Secretary of the agreement, as reasonably projected by the Secretary, exceed the cost to the Secretary, as similarly projected, in the absence of the agreement;

(C) regarding the use of net revenues, as described in the agreement under this section, for such other activities in support of postsecondary education as may be agreed to by the Secretary and the guaranty agency;

(D) regarding the standards by which the guaranty agency's performance of the agency's responsibilities under the agreement will be assessed, and the consequences for a guaranty agency's failure to achieve a specified level of performance on 1 or more performance standards;

(E) regarding the circumstances in which a guaranty agency's agreement under this section may be ended in advance of the agreement's expiration date;

(F) regarding such other businesses, previously purchased or developed with reserve funds, that relate to the program under this part and in which the Secretary permits the guaranty agency to engage; and

(G) such other provisions as the Secretary may determine to be necessary to protect the United States from the risk of unreasonable loss and to promote the purposes of this part;


(3) shall provide for uniform lender participation with the guaranty agency under the terms of the agreement; and

(4) shall not prohibit or restrict borrowers from selecting a lender of the borrower's choosing, subject to the prohibitions and restrictions applicable to the selection under this chapter.

(c) Public notice

(1) In general

The Secretary shall publish in the Federal Register a notice to all guaranty agencies that sets forth—

(A) an invitation for the guaranty agencies to enter into agreements under this section; and

(B) the criteria that the Secretary will use for selecting the guaranty agencies with which the Secretary will enter into agreements under this section.

(2) Agreement notice

The Secretary shall notify the members of the authorizing committees not later than 30 days prior to concluding an agreement under this section. The notice shall contain—

(A) a description of the voluntary flexible agreement and the performance goals established by the Secretary for the agreement;

(B) a list of participating guaranty agencies and the specific statutory or regulatory waivers provided to each guaranty agency;

(C) a description of the standards by which each guaranty agency's performance under the agreement will be assessed; and

(D) a description of the fees that will be paid to each participating guaranty agency.

(3) Waiver notice

The Secretary shall notify the members of the authorizing committees not later than 30 days prior to the granting of a waiver pursuant to subsection (a)(2) 1 to a guaranty agency that is not a party to a voluntary flexible agreement.

(4) Public availability

The text of any voluntary flexible agreement, and any subsequent revisions, and any waivers related to section 1078(b)(3) of this title that are not part of such an agreement, shall be readily available to the public.

(5) Modification notice

The Secretary shall notify the members of the authorizing committees 30 days prior to any modifications to an agreement under this section.

(d) Termination

At the expiration or early termination of an agreement under this section, the Secretary shall reinstate the guaranty agency's prior agreements under subsections (b) and (c) of section 1078 of this title, subject only to such additional requirements as the Secretary determines to be necessary in order to ensure the efficient transfer of responsibilities between the agreement under this section and the agreements under subsections (b) and (c) of section 1078 of this title, and including the guaranty agency's compliance with reserve requirements under sections 1072 and 1078 of this title.

(Pub. L. 89–329, title IV, §428A, as added Pub. L. 105–244, title IV, §418, Oct. 7, 1998, 112 Stat. 1691; amended Pub. L. 109–171, title VIII, §8014(b)(3), (f), Feb. 8, 2006, 120 Stat. 169, 170; Pub. L. 110–315, title I, §103(b)(5), title IV, §423, Aug. 14, 2008, 122 Stat. 3089, 3231.)

References in Text

Paragraph (2) of subsec. (a) of this section, referred to in subsecs. (a)(1) and (c)(3), was struck out by Pub. L. 109–171, §8014(f)(2), and par. (3) was redesignated (2). See 2006 Amendment note below.

Prior Provisions

A prior section 1078–1, Pub. L. 89–329, title IV, §428A, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1384; amended Pub. L. 100–50, §10(n), (o)(1), (p)(1), (q), (r)(1), June 3, 1987, 101 Stat. 343, 344; Pub. L. 100–369, §§3–5(a), (b)(3), July 18, 1988, 102 Stat. 835, 836; Pub. L. 101–239, title II, §2003(a)(1), (b)(1), (c)(1), Dec. 19, 1989, 103 Stat. 2112, 2114; Pub. L. 101–508, title III, §3006(b), Nov. 5, 1990, 104 Stat. 1388–28; Pub. L. 102–26, §2(c)(1), Apr. 9, 1991, 105 Stat. 123; Pub. L. 102–325, title IV, §417, July 23, 1992, 106 Stat. 529; Pub. L. 103–208, §2(c)(29)–(32), Dec. 20, 1993, 107 Stat. 2465, 2466, related to Federal supplemental loans for students, prior to repeal by Pub. L. 103–66, title IV, §4047(b), (d), Aug. 10, 1993, 107 Stat. 364, effective July 1, 1994.

Another prior section 1078–1, Pub. L. 89–329, title IV, §428A, as added Pub. L. 94–482, title I, §127(a), Oct. 12, 1976, 90 Stat. 2120; amended Pub. L. 95–43, §1(a)(30)–(32), June 15, 1977, 91 Stat. 216; Pub. L. 96–374, title IV, §412(e), (f), title XIII, §1391(a)(1), Oct. 3, 1980, 94 Stat. 1416, 1417, 1503; Pub. L. 97–35, title V, §535(e), Aug. 13, 1981, 95 Stat. 455, related to student loan insurance programs, prior to the general amendment of this part by Pub. L. 99–498.

Amendments

2008—Subsec. (a)(3). Pub. L. 110–315, §423, added par. (3).

Subsec. (c)(2), (3). Pub. L. 110–315, §103(b)(5)(A), (B), substituted "members of the authorizing committees" for "Chairperson and the Ranking Minority Member of the Committee on Labor and Human Resources of the Senate and the Committee on Education and the Workforce of the House of Representatives".

Subsec. (c)(5). Pub. L. 110–315, §103(b)(5)(C), substituted "members of the authorizing committees" for "Chairperson and the Ranking Minority Members of the Committee on Labor and Human Resources of the Senate and the Committee on Education and the Workforce of the House of Representatives".

2006—Subsec. (a)(1)(B). Pub. L. 109–171, §8014(f)(1), struck out "unless the Secretary determines that such a waiver is consistent with the purposes of this section and is limited to activities of the guaranty agency within the State or States for which the guaranty agency serves as the designated guarantor" before "; or".

Subsec. (a)(1)(C). Pub. L. 109–171, §8014(b)(3), added subpar. (C).

Subsec. (a)(2), (3). Pub. L. 109–171, §8014(f)(2), (3), redesignated par. (3) as (2) and struck out heading and text of former par. (2). Text read as follows: "If the Secretary grants a waiver pursuant to paragraph (1)(B), any guaranty agency doing business within the affected State or States may request, and the Secretary shall grant, an identical waiver to such guaranty agency under the same terms and conditions (including service area limitations) as govern the original waiver."

Subsec. (a)(4). Pub. L. 109–171, §8014(f)(4), struck out par. (4), which required the Secretary to report to congressional committees regarding the impact that the voluntary flexible agreements had on program integrity, program and cost efficiencies, and the availability and delivery of student financial aid.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date

Section effective Oct. 1, 1998, see section 3 of Pub. L. 105–244, set out as an Effective Date of 1998 Amendment note under section 1001 of this title.

1 See References in Text note below.

§1078–2. Federal PLUS loans

(a) Authority to borrow

(1) Authority and eligibility

Prior to July 1, 2010, a graduate or professional student or the parents of a dependent student shall be eligible to borrow funds under this section in amounts specified in subsection (b), if—

(A) the graduate or professional student or the parents do not have an adverse credit history as determined pursuant to regulations promulgated by the Secretary;

(B) in the case of a graduate or professional student or parent who has been convicted of, or has pled nolo contendere or guilty to, a crime involving fraud in obtaining funds under this subchapter, such graduate or professional student or parent has completed the repayment of such funds to the Secretary, or to the holder in the case of a loan under this subchapter obtained by fraud; and

(C) the graduate or professional student or the parents meet such other eligibility criteria as the Secretary may establish by regulation, after consultation with guaranty agencies, eligible lenders, and other organizations involved in student financial assistance.

(2) Terms, conditions, and benefits

Except as provided in subsections (c), (d), and (e), loans made under this section shall have the same terms, conditions, and benefits as all other loans made under this part.

(3) Special rules

(A) Parent borrowers

Whenever necessary to carry out the provisions of this section, the terms "student" and "borrower" as used in this part shall include a parent borrower under this section.

(B)(i) Extenuating circumstances

An eligible lender may determine that extenuating circumstances exist under the regulations promulgated pursuant to paragraph (1)(A) if, during the period beginning January 1, 2007, and ending December 31, 2009, an applicant for a loan under this section—

(I) is or has been delinquent for 180 days or fewer on mortgage loan payments or on medical bill payments during such period; and

(II) does not otherwise have an adverse credit history, as determined by the lender in accordance with the regulations promulgated pursuant to paragraph (1)(A), as such regulations were in effect on the day before May 7, 2008.

(ii) Definition of mortgage loan

In this subparagraph, the term "mortgage loan" means an extension of credit to a borrower that is secured by the primary residence of the borrower.

(iii) Rule of construction

Nothing in this subparagraph shall be construed to limit an eligible lender's authority under the regulations promulgated pursuant to paragraph (1)(A) to determine that extenuating circumstances exist.

(b) Limitation based on need

Any loan under this section may be counted as part of the expected family contribution in the determination of need under this subchapter, but no loan may be made to any graduate or professional student or any parent under this section for any academic year in excess of (A) the student's estimated cost of attendance, minus (B) other financial aid as certified by the eligible institution under section 1078(a)(2)(A) of this title. The annual insurable limit on account of any student shall not be deemed to be exceeded by a line of credit under which actual payments to the borrower will not be made in any year in excess of the annual limit.

(c) PLUS loan disbursement

All loans made under this section shall be disbursed in accordance with the requirements of section 1078–7 of this title and shall be disbursed by—

(1) an electronic transfer of funds from the lender to the eligible institution; or

(2) a check copayable to the eligible institution and the graduate or professional student or parent borrower.

(d) Payment of principal and interest

(1) Commencement of repayment

Repayment of principal on loans made under this section shall commence not later than 60 days after the date such loan is disbursed by the lender, subject to deferral—

(A)(i) during any period during which the parent borrower or the graduate or professional student borrower meets the conditions required for a deferral under section 1077(a)(2)(C) or 1078(b)(1)(M) of this title; and

(ii) upon the request of the parent borrower, during any period during which the student on whose behalf the loan was borrowed by the parent borrower meets the conditions required for a deferral under section 1077(a)(2)(C)(i)(I) or 1078(b)(1)(M)(i)(I) of this title; and

(B)(i) in the case of a parent borrower, upon the request of the parent borrower, during the 6-month period beginning on the later of—

(I) the day after the date the student on whose behalf the loan was borrowed ceases to carry at least one-half the normal full-time academic workload (as determined by the institution); or

(II) if the parent borrower is also a student, the day after the date such parent borrower ceases to carry at least one-half such a workload; and


(ii) in the case of a graduate or professional student borrower, during the 6-month period beginning on the day after the date such student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution).

(2) Capitalization of interest

(A) In general

Interest on loans made under this section for which payments of principal are deferred pursuant to paragraph (1) shall, if agreed upon by the borrower and the lender—

(i) be paid monthly or quarterly; or

(ii) be added to the principal amount of the loan not more frequently than quarterly by the lender.

(B) Insurable limits

Capitalization of interest under this paragraph shall not be deemed to exceed the annual insurable limit on account of the borrower.

(3) Subsidies prohibited

No payments to reduce interest costs shall be paid pursuant to section 1078(a) of this title on loans made pursuant to this section.

(4) Applicable rates of interest

Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in section 1077a of this title.

(5) Amortization

The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repayment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that—

(A) the amount of the periodic payment will be adjusted annually, or

(B) the period of repayment of principal will be lengthened or shortened,


in order to reflect adjustments in interest rates occurring as a consequence of section 1077a(c)(4) of this title.

(e) Refinancing

(1) Refinancing to secure combined payment

An eligible lender may at any time consolidate loans held by it which are made under this section to a borrower, including loans which were made under this section as in effect prior to October 17, 1986, under a single repayment schedule which provides for a single principal payment and a single payment of interest, and shall calculate the repayment period for each included loan from the date of the commencement of repayment of the most recent included loan. Unless the consolidated loan is obtained by a borrower who is electing to obtain variable interest under paragraph (2) or (3), such consolidated loan shall bear interest at the weighted average of the rates of all included loans. The extension of any repayment period of an included loan pursuant to this paragraph shall be reported (if required by them) to the Secretary or guaranty agency insuring the loan, as the case may be, but no additional insurance premiums shall be payable with respect to any such extension. The extension of the repayment period of any included loan shall not require the formal extension of the promissory note evidencing the included loan or the execution of a new promissory note, but shall be treated as an administrative forbearance of the repayment terms of the included loan.

(2) Refinancing to secure variable interest rate

An eligible lender may reissue a loan which was made under this section before July 1, 1987, or under this section as in effect prior to October 17, 1986, in order to permit the borrower to obtain the interest rate provided under section 1077a(c)(4) of this title. A lender offering to reissue a loan or loans for such purpose may charge a borrower an amount not to exceed $100 to cover the administrative costs of reissuing such loan or loans, not more than one-half of which shall be paid to the guarantor of the loan being reissued to cover costs of reissuance. Reissuance of a loan under this paragraph shall not affect any insurance applicable with respect to the loan, and no additional insurance fee may be charged to the borrower with respect to the loan.

(3) Refinancing by discharge of previous loan

A borrower who has applied to an original lender for reissuance of a loan under paragraph (2) and who is denied such reissuance may obtain a loan from another lender for the purpose of discharging the loan from such original lender. A loan made for such purpose—

(A) shall bear interest at the applicable rate of interest provided under section 1077a(c)(4) of this title;

(B) shall not result in the extension of the duration of the note (other than as permitted under subsection (d)(5)(B));

(C) may be subject to an additional insurance fee but shall not be subject to the administrative cost charge permitted by paragraph (2) of this subsection; and

(D) shall be applied to discharge the borrower from any remaining obligation to the original lender with respect to the original loan.

(4) Certification in lieu of promissory note presentation

Each new lender may accept certification from the original lender of the borrower's original loan in lieu of presentation of the original promissory note.

(f) Verification of immigration status and social security number

A parent who wishes to borrow funds under this section shall be subject to verification of the parent's—

(1) immigration status in the same manner as immigration status is verified for students under section 1091(g) of this title; and

(2) social security number in the same manner as social security numbers are verified for students under section 1091(p) of this title.

(Pub. L. 89–329, title IV, §428B, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1386; amended Pub. L. 100–50, §10(o), (p)(2), (q), (r)(1), June 3, 1987, 101 Stat. 343, 344; Pub. L. 102–325, title IV, §418, July 23, 1992, 106 Stat. 531; Pub. L. 103–66, title IV, §4109(a), Aug. 10, 1993, 107 Stat. 369; Pub. L. 105–178, title VIII, §8301(a)(2), June 9, 1998, 112 Stat. 497; Pub. L. 105–244, title IV, §§416(a)(2), 419, Oct. 7, 1998, 112 Stat. 1680, 1694; Pub. L. 109–171, title VIII, §§8005(c), 8014(g), Feb. 8, 2006, 120 Stat. 158, 171; Pub. L. 110–227, §§3(a), 4, May 7, 2008, 122 Stat. 742, 743; Pub. L. 110–315, title IV, §424(a), Aug. 14, 2008, 122 Stat. 3232; Pub. L. 111–39, title IV, §402(f)(2), July 1, 2009, 123 Stat. 1943; Pub. L. 111–152, title II, §2205, Mar. 30, 2010, 124 Stat. 1075.)

Prior Provisions

A prior section 1078–2, Pub. L. 89–329, title IV, §428B, as added Pub. L. 96–374, title IV, §419, Oct. 3, 1980, 94 Stat. 1424; amended Pub. L. 97–35, title V, §§532(b)(3), 534(a)(2), (c)(1), (2), Aug. 13, 1981, 95 Stat. 452, 454; Pub. L. 98–79, §12, Aug. 15, 1983, 97 Stat. 484, related to auxiliary loans to assist students, prior to the general revision of this part by Pub. L. 99–498.

Amendments

2010—Subsec. (a)(1). Pub. L. 111–152 substituted "Prior to July 1, 2010, a graduate" for "A graduate" in introductory provisions.

2009—Subsec. (e)(3)(B). Pub. L. 111–39, §402(f)(2)(A), substituted "subsection (d)(5)(B)" for "subsection (c)(5)(B)".

Subsec. (e)(5). Pub. L. 111–39, §402(f)(2)(B), struck out par. (5) which related to notification to borrowers of availability of refinancing options for certain loans made before Oct. 17, 1986.

2008—Subsec. (a)(3). Pub. L. 110–227, §4, amended par. (3) generally. Prior to amendment, text read as follows: "Whenever necessary to carry out the provisions of this section, the terms 'student' and 'borrower' as used in this part shall include a parent borrower under this section."

Subsec. (a)(3)(B)(i)(II). Pub. L. 110–315, §424(a)(1), added subcl. (II) and struck out former subcl. (II) which read as follows: "is not and has not been more than 89 days delinquent on the repayment of any other debt during such period."

Subsec. (d)(1), (2). Pub. L. 110–315, §424(a)(2), added pars. (1) and (2) and struck out former pars. (1) and (2) which related to commencement of repayment and capitalization of interest.

Pub. L. 110–227, §3(a), amended pars. (1) and (2) generally. Prior to amendment, text related to commencement of repayment and capitalization of interest.

2006—Subsec. (a)(1). Pub. L. 109–171, §8005(c)(1)(A), in introductory provisions, substituted "A graduate or professional student or the parents" for "Parents".

Subsec. (a)(1)(A). Pub. L. 109–171, §8005(c)(1)(B), substituted "the graduate or professional student or the parents" for "the parents".

Subsec. (a)(1)(B). Pub. L. 109–171, §8014(g)(1), (3), added subpar. (B). Former subpar. (B) redesignated (C).

Pub. L. 109–171, §8005(c)(1)(C), substituted "the graduate or professional student or the parents" for "the parents".

Subsec. (a)(1)(C). Pub. L. 109–171, §8014(g)(2), redesignated subpar. (B) as (C).

Subsec. (b). Pub. L. 109–171, §8005(c)(2), substituted "any graduate or professional student or any parent" for "any parent".

Subsec. (c)(2). Pub. L. 109–171, §8005(c)(3), substituted "graduate or professional student or parent" for "parent".

Subsec. (d)(1). Pub. L. 109–171, §8005(c)(4), substituted "the graduate or professional student or the parent" for "the parent".

1998—Subsec. (a). Pub. L. 105–244, §419(1), amended heading and text of subsec. (a) generally. Prior to amendment, text read as follows: "Parents of a dependent student, who do not have an adverse credit history as determined pursuant to regulations of the Secretary, shall be eligible to borrow funds under this section in amounts specified in subsection (b) of this section, and unless otherwise specified in subsections (c), (d), and (e) of this section, such loans shall have the same terms, conditions, and benefits as all other loans made under this part. Whenever necessary to carry out the provisions of this section, the terms 'student' and 'borrower' as used in this part shall include a parent borrower under this section."

Subsec. (d)(4). Pub. L. 105–244, §416(a)(2), substituted "section 1077a" for "section 1077a(c)".

Pub. L. 105–178 which directed substitution of "section 1077a of this title for loans made under this section" for "section 1077a(c) of this title" in "section 428B(d)(4) (20 U.S.C. 1078–2(d)(4))" could not be executed because it did not indicate what act was to be amended.

Subsec. (f). Pub. L. 105–244, §419(2), added subsec. (f).

1993—Subsec. (c). Pub. L. 103–66 inserted "shall be disbursed in accordance with the requirements of section 1078–7 of this title and" after "under this section".

1992Pub. L. 102–325, §418(a), substituted "Federal PLUS" for "PLUS" in section catchline.

Subsec. (a). Pub. L. 102–325, §418(b)(1), substituted "subsections (c), (d), and (e)" for "subsections (c) and (d)" and inserted ", who do not have an adverse credit history as determined pursuant to regulations of the Secretary," after "a dependent student".

Subsec. (b). Pub. L. 102–325, §418(b)(2), struck out subsec. (b) designation and heading, redesignated par. (3) as subsec. (b), and struck out pars. (1) and (2) which set the annual limit on the amount parents may borrow for one student in any academic year at $4,000 and set the aggregate insured principal amount for insured loans at not to exceed $20,000.

Subsec. (c). Pub. L. 102–325, §418(b)(4), added subsec. (c). Former subsec. (c) redesignated (d).

Subsec. (d). Pub. L. 102–325, §418(c), (d), amended pars. (1) and (2) generally. Prior to amendment, pars. (1) and (2) read as follows:

"(1) Commencement of repayment.—Repayment of principal on loans made under this section shall commence not later than 60 days after the date such loan is disbursed by the lender, subject to deferral (A) during any period during which the parent meets the conditions required for a deferral under clause (i), (viii), or (ix) of section 1077(a)(2)(C) or 1078(b)(1)(M) of this title; and (B) during any period during which the borrower has a dependent student for whom a loan obligation was incurred under this section and who meets the conditions required for a deferral under clause (i) of either such section.

"(2) Capitalization of interest.—Interest on loans made under this section for which payments of principal are deferred pursuant to paragraph (1) of this subsection shall, if agreed upon by the borrower and the lender (A) be paid monthly or quarterly or (B) be added to the principal amount of the loan on a quarterly basis by the lender. Such capitalization of interest shall not be deemed to exceed the annual insurable limit on account of the student."

Pub. L. 102–325, §418(b)(3), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e).

Subsec. (e). Pub. L. 102–325, §418(b)(3), redesignated subsec. (d) as (e).

1987—Subsec. (a). Pub. L. 100–50, §10(o)(2)(A), struck out ", but such a parent borrower shall not be eligible for any deferment pursuant to section 1077(a)(2)(C) or 1078(b)(1)(M) of this title except for the deferments allowed (with respect to the student) under clauses (i), (viii), and (ix) of such sections" after "borrower under this section".

Subsec. (b)(3). Pub. L. 100–50, §10(p)(2), amended first sentence generally, substituting "for any academic year in excess of (A) the student's estimated cost of attendance, minus (B) other financial aid" for "which would cause the combined loans of the parent and the student for any academic year to exceed the student's estimated cost of attendance minus such student's estimated financial assistance".

Subsec. (c)(1). Pub. L. 100–50, §10(o)(2)(B), struck out "pursuant to sections 1077(a)(2)(C)(i), (viii), and (ix) and 1078(b)(1)(M)(i), (viii), and (ix) of this title" after "subject to deferral" and inserted in lieu cls. (A) and (B).

Subsec. (c)(2). Pub. L. 100–50, §10(o)(1), (2)(C), (q), in introductory provisions, struck out "and interest" after first reference to "principal", and substituted "pursuant to paragraph (1) of this subsection" for "under sections 1077(a)(2)(C)(i) and 1078(b)(1)(M)(i) of this title", and, in subpar. (A), inserted "monthly or" before "quarterly".

Subsec. (d)(1). Pub. L. 100–50, §10(r)(1)(A), inserted "at any time" after "eligible lender may" in first sentence, substituted "the consolidated loan is obtained by a borrower who is electing to obtain variable interest under paragraph (2) or (3)" for "the borrower complies with the requirements of paragraph (2)" in second sentence, and inserted "(if required by them)" after "shall be reported" in third sentence.

Subsec. (d)(2). Pub. L. 100–50, §10(r)(1)(B), inserted "under this section before July 1, 1987, or" before "under this section" and substituted "to reissue a loan or loans" for "to reissue a loan" and "reissuing such loan or loans" for "reissuing such loan".

Subsec. (d)(5). Pub. L. 100–50, §10(r)(1)(C), substituted "October 1, 1987" for "January 1, 1987" and, in subpar. (B), inserted "and of the practical consequences of such options in terms of interest rates and monthly and total payments for a set of loan examples" before semicolon at end.

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Effective Date of 2008 Amendment

Amendment by Pub. L. 110–315 effective for loans for which the first disbursement is made on or after July 1, 2008, see section 424(c) of Pub. L. 110–315, set out as a note under section 1078 of this title.

Amendment by section 3(a) of Pub. L. 110–227 effective for loans first disbursed on or after July 1, 2008, see section 3(c) of Pub. L. 110–227, set out as a note under section 1078 of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 1998 Amendment

Amendment by section 416(a)(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 section 1078–3 of this title 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 419 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

Pub. L. 103–66, title IV, §4109(c), Aug. 10, 1993, 107 Stat. 370, provided that: "The amendments made by this section [amending this section and section 1078–7 of this title] shall be effective with respect to loans for which the first disbursement is made on or after October 1, 1993."

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–325 effective July 23, 1992, except that changes made in subsec. (b), relating to annual and aggregate loan limits, are applicable with respect to loans for which first disbursement is made on or after July 1, 1993, changes made in subsec. (a) with respect to use of credit histories are applicable with respect to loans for which first disbursement is made on or after July 1, 1993, and subsec. (c), as added by Pub. L. 102–325, relating to disbursement of Federal PLUS Loans, is applicable with respect to loans for which first disbursement is made on or after Oct. 1, 1992, see section 432 of Pub. L. 102–325, 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.

Amendment of Note or Other Written Evidence of Loan by Eligible Lender at Request of Borrower; Circumstances; Denial of Request

Pub. L. 100–50, §10(r)(2), June 3, 1987, 101 Stat. 344, provided that: "An eligible lender who has refinanced a loan or loans under section 428A(d) [former 20 U.S.C. 1078–1(d)] or 428B(d) [20 U.S.C. 1078–2(d)] between the date of enactment of the Higher Education Amendments of 1986 [Oct. 17, 1986] and July 1, 1987, may, at the request of a borrower or with the written consent of the borrower, amend the note or other written evidence of loan as necessary to comply with the requirements of such sections and section 427A(c)(4) [20 U.S.C. 1077a(c)(4)] as amended by this Act. Any borrower who is denied such a request shall be treated as eligible to obtain a loan from another lender under section 428A(d)(3) or 428B(d)(3), as applicable, for the purposes of discharging the loan from the original lender, and a borrower exercising this option shall not be subject to an additional insurance fee under section 428A(d)(3)(C) or 428B(d)(3)(C)."

§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) 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). 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 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 as determined under section 1078(b)(7)(A) of this title;

(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 or under section 1087e(g) of this title terminates under both sections upon receipt of a consolidation loan under this section or under section 1087e(g) of this title, except that—

(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;

(IV) loans received prior to the date of the first consolidation loan may be added to a subsequent consolidation loan; and

(V) an individual may obtain a subsequent consolidation loan under section 1087e(g) of this title only—

(aa) for the purposes of obtaining income contingent repayment or income-based repayment, and only if the loan has been submitted to the guaranty agency for default aversion or if the loan is already in default;

(bb) for the purposes of using the public service loan forgiveness program under section 1087e(m) of this title; or

(cc) for the purpose of using the no accrual of interest for active duty service members benefit offered under section 1087e(o) of this title.

(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, and first disbursed before July 1, 2010, 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 E of this subchapter;

(C) made under part D 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 part E 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) 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), 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;

(B) that each consolidation loan made by the lender will bear interest, and be subject to repayment, in accordance with subsection (c);

(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), 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 before July 1, 2010;

(F) that the lender shall disclose to a prospective borrower, in simple and understandable terms, at the time the lender provides an application for a consolidation loan—

(i) whether consolidation would result in a loss of loan benefits under this part or part D, including loan forgiveness, cancellation, and deferment;

(ii) with respect to Federal Perkins Loans under part E—

(I) that if a borrower includes a Federal Perkins Loan under part E in the consolidation loan, the borrower will lose all interest-free periods that would have been available for the Federal Perkins Loan, such as—

(aa) the periods during which no interest accrues on such loan while the borrower is enrolled in school at least half-time;

(bb) the grace period under section 1087dd(c)(1)(A) of this title; and

(cc) the periods during which the borrower's student loan repayments are deferred under section 1087dd(c)(2) of this title;


(II) that if a borrower includes a Federal Perkins Loan in the consolidation loan, the borrower will no longer be eligible for cancellation of part or all of the Federal Perkins Loan under section 1087ee(a) of this title; and

(III) the occupations listed in section 1087ee of this title that qualify for Federal Perkins Loan cancellation under section 1087ee(a) of this title;


(iii) the repayment plans that are available to the borrower;

(iv) the options of the borrower to prepay the consolidation loan, to pay such loan on a shorter schedule, and to change repayment plans;

(v) that borrower benefit programs for a consolidation loan may vary among different lenders;

(vi) the consequences of default on the consolidation loan; and

(vii) that by applying for a consolidation loan, the borrower is not obligated to agree to take the consolidation loan; and


(G) 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) 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 consumer reporting agencies 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 consumer reporting agencies.

(5) Direct loans

If, before July 1, 2010, a borrower is unable to obtain a consolidation loan from a lender with an agreement under subsection (a)(1), or is unable to obtain a consolidation loan with income-sensitive repayment terms or income-based repayment terms acceptable to the borrower from such a lender, or chooses to obtain a consolidation loan for the purposes of using the public service loan forgiveness program offered under section 1087e(m) of this title, the Secretary shall offer any such borrower who applies for it, a Federal Direct Consolidation loan. In addition, in the event that a borrower chooses to obtain a consolidation loan for the purposes of using the no accrual of interest for active duty service members program offered under section 1087e(o) of this title, the Secretary shall offer a Federal Direct Consolidation loan to any such borrower who applies for participation in such program. A direct consolidation loan offered under this paragraph shall, as requested by the borrower, be repaid either pursuant to income contingent repayment under part D of this subchapter, pursuant to income-based repayment under section 1098e of this title, or pursuant to any other repayment provision under this section, except that if a borrower intends to be eligible to use the public service loan forgiveness program under section 1087e(m) of this title, such loan shall be repaid using one of the repayment options described in section 1087e(m)(1)(A) of this title. 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) or subsection (d)(1)(C)(ii);

(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—

(i) on or after October 1, 1998, and before July 1, 2006, the applicable interest rate shall be determined under section 1077a(k)(4) of this title; or

(ii) on or after July 1, 2006, and that is disbursed before July 1, 2010, the applicable interest rate shall be determined under section 1077a(l)(3) 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, and disbursed before July 1, 2010, 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) 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, income-sensitive, or income-based repayment schedules, established by the lender in accordance with the regulations of the Secretary. Except as required by such income-sensitive or income-based repayment schedules, or by the terms of repayment pursuant to income contingent repayment offered by the Secretary under subsection (b)(5), 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) except in the case of an income-based repayment schedule under section 1098e of this title, 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;

(B) except as required by the terms of repayment pursuant to income contingent repayment offered by the Secretary under subsection (b)(5), 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; and

(C) an income-based repayment schedule under section 1098e of this title shall not be available to a consolidation loan borrower who used the proceeds of the loan to discharge the liability on a loan under section 1078–2 of this title, or a Federal Direct PLUS loan, made on behalf of a dependent student.

(4) Commencement of repayment

Repayment of a consolidation loan shall commence within 60 days after all holders have, pursuant to subsection (b)(1)(D), 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) 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); 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 account 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 June 30, 2010. No loan may be made under this section for which the disbursement is on or after July 1, 2010. 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). 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 this subsection into the insurance fund established in section 1081 of this title.

(Pub. L. 89–329, title IV, §428C, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1388; amended Pub. L. 100–50, §10(s), June 3, 1987, 101 Stat. 345; Pub. L. 102–325, title IV, §419, July 23, 1992, 106 Stat. 532; Pub. L. 102–408, title III, §306(a), (b), Oct. 13, 1992, 106 Stat. 2084, 2086; Pub. L. 103–66, title IV, §§4046(a), (b)(2), 4106(a), Aug. 10, 1993, 107 Stat. 360, 363, 368; Pub. L. 103–208, §2(c)(33)–(37), Dec. 20, 1993, 107 Stat. 2466; Pub. L. 103–382, title III, §356, Oct. 20, 1994, 108 Stat. 3967; Pub. L. 104–208, div. A, title I, §101(e) [title VI, §602(b)(1)(A)(ii)], Sept. 30, 1996, 110 Stat. 3009–233, 3009-283; Pub. L. 105–33, title VI, §6104(3), Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–78, title VI, §609(b)–(e), Nov. 13, 1997, 111 Stat. 1522, 1523; Pub. L. 105–244, title IV, §§416(b)(2), 420, Oct. 7, 1998, 112 Stat. 1682, 1695; Pub. L. 107–139, §1(a)(2), Feb. 8, 2002, 116 Stat. 8; Pub. L. 109–171, title VIII, §§8004(b)(3), 8009(a), (b)(2), (c), Feb. 8, 2006, 120 Stat. 158, 163, 164; Pub. L. 109–234, title VII, §7015(a), (c), (d), June 15, 2006, 120 Stat. 485; Pub. L. 110–84, title II, §203(b)(1), (2), Sept. 27, 2007, 121 Stat. 794, 795; Pub. L. 110–315, title IV, §§425(a)–(b)(2), (c), (d)(1), (e), 432(b)(3), Aug. 14, 2008, 122 Stat. 3233–3235, 3246; Pub. L. 111–39, title IV, §402(c)(1), (f)(3), July 1, 2009, 123 Stat. 1940, 1943; Pub. L. 111–152, title II, §2206(a), Mar. 30, 2010, 124 Stat. 1075.)

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. Subparts I and II of part A of title VII of the Act are classified generally to subpart I (§292 et seq.) and subpart II (§292q et seq.), respectively, of part A of subchapter V of chapter 6A of Title 42, The Public Health and Welfare. Part E of title VIII of the Act is classified generally to part E (§297a et seq.) of subchapter VI of chapter 6A of Title 42. For complete classification of this Act to the Code, see Short Title note set out under section 201 of Title 42 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, §428C, as added Pub. L. 99–272, title XVI, §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

2010—Subsec. (a)(4)(A). Pub. L. 111–152, §2206(a)(1), inserted ", and first disbursed before July 1, 2010" after "under this part".

Subsec. (b)(1)(E). Pub. L. 111–152, §2206(a)(2)(A), inserted ", and before July 1, 2010" before semicolon.

Subsec. (b)(5). Pub. L. 111–152, §2206(a)(2)(B), substituted "If, before July 1, 2010," for "In the event that".

Subsec. (c)(1)(A)(ii). Pub. L. 111–152, §2206(a)(3)(A), inserted "and that is disbursed before July 1, 2010," after "2006,".

Subsec. (c)(1)(C). Pub. L. 111–152, §2206(a)(3)(B), inserted "and disbursed before July 1, 2010," after "1994,".

Subsec. (e). Pub. L. 111–152, §2206(a)(4), substituted "June 30, 2010. No loan may be made under this section for which the disbursement is on or after July 1, 2010." for "September 30, 2014."

2009—Subsec. (a)(4)(E). Pub. L. 111–39, §402(f)(3)(A), substituted "part E" for "subpart II of part B".

Subsec. (c)(2)(A). Pub. L. 111–39, §402(f)(3)(B), in introductory provisions, substituted "subsection (b)(2)" for "subsection (b)(2)(F)" and inserted comma after "graduated".

Subsec. (c)(3)(A). Pub. L. 111–39, §402(c)(1), substituted "section 1098e of this title," for "section 1098e of this title".

Subsec. (d)(3)(D). Pub. L. 111–39, §402(f)(3)(C), substituted "loan insurance account" for "loan insurance fund".

Subsec. (f)(3). Pub. L. 111–39, §402(f)(3)(D), substituted "this subsection" for "subsection (a) of this section".

2008—Subsec. (a)(3)(B)(i)(V)(cc). Pub. L. 110–315, §425(a), added item (cc).

Subsec. (b)(1)(F), (G). Pub. L. 110–315, §425(b)(1), added subpar. (F) and redesignated former subpar. (F) as (G).

Subsec. (b)(4)(E)(i). Pub. L. 110–315, §432(b)(3)(A), substituted "consumer reporting agencies" for "credit bureau organizations".

Subsec. (b)(4)(E)(ii). Pub. L. 110–315, §432(b)(3)(B), substituted "consumer reporting agencies" for "organizations".

Subsec. (b)(5). Pub. L. 110–315, §425(c), made technical correction to directory language of Pub. L. 110–84, §203(b)(2)(C). See 2007 Amendment note below.

Pub. L. 110–315, §425(b)(2), substituted "A direct consolidation loan offered under this paragraph" for "Such direct consolidation loan" and inserted after first sentence "In addition, in the event that a borrower chooses to obtain a consolidation loan for the purposes of using the no accrual of interest for active duty service members program offered under section 1087e(o) of this title, the Secretary shall offer a Federal Direct Consolidation loan to any such borrower who applies for participation in such program."

Subsec. (c)(2)(A). Pub. L. 110–315, §425(d)(1)(A), in introductory provisions, substituted "income-sensitive, or income-based" for "or income-sensitive" and inserted "or income-based" after "such income-sensitive".

Subsec. (c)(3). Pub. L. 110–315, §425(d)(1)(B), inserted "except in the case of an income-based repayment schedule under section 1098e of this title" before "a repayment schedule" in subpar. (A) and added subpar. (C).

Subsec. (e). Pub. L. 110–315, §425(e), substituted "2014" for "2012".

2007—Subsec. (a)(3)(B)(i)(V). Pub. L. 110–84, §203(b)(1)(A), amended subcl. (V) generally. Prior to amendment, subcl. (V) read as follows: "an individual may obtain a subsequent consolidation loan under section 1087e(g) of this title only for the purposes of obtaining an income contingent repayment plan, and only if the loan has been submitted to the guaranty agency for default aversion."

Subsec. (a)(3)(B)(i)(V)(aa). Pub. L. 110–84, §203(b)(2)(A), substituted "income contingent repayment or income-based repayment," for "an income contingent repayment plan," and inserted "or if the loan is already in default" before semicolon.

Subsec. (b)(5). Pub. L. 110–84, §203(b)(2)(C), as amended by Pub. L. 110–315, §425(c), inserted ", pursuant to income-based repayment under section 1098e of this title," after "part D of this subchapter" in third sentence.

Pub. L. 110–84, §203(b)(2)(B), inserted "or income-based repayment terms" after "income-sensitive repayment terms" in first sentence.

Pub. L. 110–84, §203(b)(1)(B), (C), inserted "or chooses to obtain a consolidation loan for the purposes of using the public service loan forgiveness program offered under section 1087e(m) of this title," after "from such a lender," in first sentence and ", except that if a borrower intends to be eligible to use the public service loan forgiveness program under section 1087e(m) of this title, such loan shall be repaid using one of the repayment options described in section 1087e(m)(1)(A) of this title" before period at end of second sentence.

2006—Subsec. (a)(3)(A)(ii)(I). Pub. L. 109–171, §8009(b)(2), inserted "as determined under section 1078(b)(7)(A) of this title" after "repayment status".

Subsec. (a)(3)(B)(i). Pub. L. 109–171, §8009(a)(1)(A), (B), substituted "under this section or under section 1087e(g) of this title terminates under both sections upon receipt of a consolidation loan under this section or under section 1087e(g) of this title" for "under this section terminates upon receipt of a consolidation loan under this section".

Subsec. (a)(3)(B)(i)(V). Pub. L. 109–171, §8009(a)(1)(C)–(E), added subcl. (V).

Subsec. (a)(3)(C). Pub. L. 109–171, §8009(c), struck out subpar. (C), which read as follows:

"(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."

Subsec. (b)(1)(A). Pub. L. 109–234, §7015(a), struck out "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)" after "loan under this section".

Subsec. (b)(5). Pub. L. 109–234, §7015(c), reenacted heading without change and substituted in text "In the event that a borrower is unable to obtain a consolidation loan from a lender with an agreement under subsection (a)(1), 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 Federal Direct Consolidation loan. Such direct consolidation loan" for "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".

Pub. L. 109–171, §8009(a)(2), which directed substitution of "In the event that a lender with an agreement under subsection (a)(1) of this section denies a consolidation loan application submitted to the lender by an eligible borrower under this section, or denies an application submitted to the lender by such a borrower for a consolidation loan with income-sensitive repayment terms, the Secretary shall offer any such borrower who applies for it, a Federal Direct Consolidation loan. The Secretary shall offer such a loan to a borrower who has defaulted, for the purpose of resolving the default." for first sentence, was repealed by Pub. L. 109–234, §7015(d). See Effective Date of 2006 Amendment note below.

Subsec. (e). Pub. L. 109–171, §8004(b)(3), substituted "2012" for "2004".

2002—Subsec. (c)(1)(A). Pub. L. 107–139 amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "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."

1998—Subsec. (a)(3). Pub. L. 105–244, §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, §420(b), added subpar. (C) and struck out former subpar. (C) which read as follows: "made under part D 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, §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, §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, §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) or subsection (d)(1)(C)(ii)".

Subsec. (c)(1). Pub. L. 105–244, §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, §420(d), substituted "September 30, 2004" for "September 30, 2002".

Subsec. (f)(2), (3). Pub. L. 105–244, §420(e), added par. (2) and redesignated former par. (2) as (3).

1997—Subsec. (a)(4)(C) to (E). Pub. L. 105–78, §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, §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, §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, §609(d), added par. (6).

Subsec. (c)(1)(A). Pub. L. 105–78, §609(e)(1), substituted "subparagraph (B), (C), or (D)" for "subparagraph (B) or (D)".

Subsec. (c)(1)(D). Pub. L. 105–78, §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, §4046(a)(1), amended heading.

Subsec. (a)(3)(A). Pub. L. 103–208, §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, §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, §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, §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, §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, §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, §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, §4046(a)(2)(C), added par. (5).

Subsec. (c)(1)(B), (C). Pub. L. 103–66, §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, §2(c)(36), inserted period at end of cl. (vi). See Codification note above.

Pub. L. 103–66, §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), 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, §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, §2(c)(37), inserted "be an amount" before "equal to".

Subsec. (c)(3)(B). Pub. L. 103–66, §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)," before "the lender".

Subsec. (f). Pub. L. 103–66, §4106(a), added subsec. (f).

1992Pub. L. 102–325, §419(a), substituted "Federal consolidation" for "Consolidation" in section catchline.

Subsec. (a)(3)(A)(i). Pub. L. 102–325, §419(b)(1)(A), substituted "$7,500" for "$5,000".

Subsec. (a)(3)(A)(ii). Pub. L. 102–325, §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, §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, 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, §419(d), added subpar. (C).

Subsec. (a)(4)(A). Pub. L. 102–325, §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, §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, §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, §306(a), added subsec. (d). Former subsec. (d) redesignated (e).

Pub. L. 102–325, §419(g), substituted "September 30, 1998" for "September 30, 1992".

Subsec. (e). Pub. L. 102–408, §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, §419(g). See above.

Pub. L. 102–408, §306(a)(1), redesignated subsec. (d) as subsec. (e).

1987—Subsec. (a)(1)(C). Pub. L. 100–50, §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, §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, §10(s)(3), substituted "eligible student loans received" for "loans received under this subchapter", "under this subchapter" 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, §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, §10(s)(5), in cl. (i), substituted "subsection (a)(3)" for "subsection (a)(2)" 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".

Subsec. (c)(2)(A)(v). Pub. L. 100–50, §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, §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 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), except as otherwise provided, see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Pub. L. 111–39, title IV, §402(c)(2), July 1, 2009, 123 Stat. 1941, provided that: "The amendment made by paragraph (1) [amending this section] shall be effective as if enacted as part of the amendments in section 425(d)(1) of the Higher Education Opportunity Act (Public Law 110–315), and shall take effect on July 1, 2009."

Effective Date of 2008 Amendment

Pub. L. 110–315, title IV, §425(d)(2), Aug. 14, 2008, 122 Stat. 3235, provided that: "The amendments made by this subsection [amending this section] shall take effect on July 1, 2009."

Effective Date of 2007 Amendment

Pub. L. 110–84, title II, §203(c), Sept. 27, 2007, 121 Stat. 795, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [enacting section 1098e of this title and amending this section and section 1087e of this title] shall be effective on July 1, 2009.

"(2) Exception.—The amendments made by subsection (b)(1) [amending this section] shall be effective on July 1, 2008."

Effective Date of 2006 Amendment

Pub. L. 109–234, title VII, §7015(b), June 15, 2006, 120 Stat. 485, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to any loan made under section 428C of the Higher Education Act of 1965 (20 U.S.C. 1078–3) for which the application is received by an eligible lender on or after the date of enactment of this Act [June 15, 2006]."

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

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

Pub. L. 104–208, div. A, title I, §101(e) [title VI, §602(b)(1)(B)], Sept. 30, 1996, 110 Stat. 3009–233, 3009-284, 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.

Pub. L. 103–66, title IV, §4046(c), Aug. 10, 1993, 107 Stat. 363, 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

Pub. L. 102–408, title III, §306(c), Oct. 13, 1992, 106 Stat. 2086, 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.

Selection of Student Loan Servicer

Pub. L. 115–31, div. H, title III, May 5, 2017, 131 Stat. 549, which provided in part that the Secretary of Education must, no later than September 30, 2017, allow student loan borrowers who are consolidating Federal student loans to select from any student loan servicer to service their new consolidated student loan, was transferred and is classified as a note under section 1087f of this title.

Pending Applicants

Pub. L. 105–78, title VI, §609(f), Nov. 13, 1997, 111 Stat. 1523, 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, §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."

1 So in original. No cl. (ii) has been enacted.

§1078–4. Commingling of funds

Notwithstanding any other provision of this part regarding permissible uses of funds from any source, funds received by a guaranty agency under any provision of this part may be commingled with funds received under any other provision of this part and may be used to carry out the purposes of such other provision, except that—

(1) the total amount expended for the purposes of such other provision shall not exceed the amount the guaranty agency would otherwise be authorized to expend; and

(2) the authority to commingle such funds shall not relieve such agency of any accounting or auditing obligations under this part.

(Pub. L. 89–329, title IV, §428D, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1393.)

§1078–5. Repealed. Pub. L. 102–164, title VI, §605(b)(1), Nov. 15, 1991, 105 Stat. 1068

Section, Pub. L. 89–329, title IV, §428E, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1393; amended Pub. L. 100–50, §10(t), June 3, 1987, 101 Stat. 345, related to State garnishment law requirements.

§1078–6. Default reduction program

(a) Other repayment incentives

(1) Sale or assignment of loan

(A) In general

Each guaranty agency, upon securing 9 payments made within 20 days of the due date during 10 consecutive months of amounts owed on a loan for which the Secretary has made a payment under paragraph (1) of section 1078(c) of this title, shall—

(i) if practicable, sell the loan to an eligible lender; or

(ii) beginning July 1, 2014, assign the loan to the Secretary if the guaranty agency has been unable to sell the loan under clause (i).

(B) Monthly payments

Neither the guaranty agency nor the Secretary shall demand from a borrower as monthly payment amounts described in subparagraph (A) more than is reasonable and affordable based on the borrower's total financial circumstances.

(C) Consumer reporting agencies

Upon the sale or assignment of the loan, the Secretary, guaranty agency or other holder of the loan shall request any consumer reporting agency to which the Secretary, guaranty agency or holder, as applicable, reported the default of the loan, to remove the record of the default from the borrower's credit history.

(D) Duties upon sale

With respect to a loan sold under subparagraph (A)(i)—

(i) the guaranty agency—

(I) shall, in the case of a sale made on or after July 1, 2014, repay the Secretary 100 percent of the amount of the principal balance outstanding at the time of such sale, multiplied by the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and

(II) may, in the case of a sale made on or after July 1, 2014, in order to defray collection costs—

(aa) charge to the borrower an amount not to exceed 16 percent of the outstanding principal and interest at the time of the loan sale; and

(bb) retain such amount from the proceeds of the loan sale; and


(ii) the Secretary shall reinstate the Secretary's obligation to—

(I) reimburse the guaranty agency for the amount that the agency may, in the future, expend to discharge the guaranty agency's insurance obligation; and

(II) pay to the holder of such loan a special allowance pursuant to section 1087–1 of this title.

(E) Duties upon assignment

With respect to a loan assigned under subparagraph (A)(ii)—

(i) the guaranty agency shall add to the principal and interest outstanding at the time of the assignment of such loan an amount equal to the amount described in subparagraph (D)(i)(II)(aa); and

(ii) the Secretary shall pay the guaranty agency, for deposit in the agency's Operating Fund established pursuant to section 1072b of this title, an amount equal to the amount added to the principal and interest outstanding at the time of the assignment in accordance with clause (i).

(F) Eligible lender limitation

A loan shall not be sold to an eligible lender under subparagraph (A)(i) if such lender has been found by the guaranty agency or the Secretary to have substantially failed to exercise the due diligence required of lenders under this part.

(G) Default due to error

A loan that does not meet the requirements of subparagraph (A) may also be eligible for sale or assignment under this paragraph upon a determination that the loan was in default due to clerical or data processing error and would not, in the absence of such error, be in a delinquent status.

(2) Use of proceeds of sales

Amounts received by the Secretary pursuant to the sale of such loans by a guaranty agency under paragraph (1)(A)(i) shall be deducted from the calculations of the amount of reimbursement for which the agency is eligible under paragraph (1)(D)(ii)(I) for the fiscal year in which the amount was received, notwithstanding the fact that the default occurred in a prior fiscal year.

(3) Borrower eligibility

Any borrower whose loan is sold or assigned under paragraph (1)(A) shall not be precluded by section 1091 of this title from receiving additional loans or grants under this subchapter (for which he or she is otherwise eligible) on the basis of defaulting on the loan prior to such loan sale or assignment.

(4) Applicability of general loan conditions

A loan that is sold or assigned under paragraph (1) shall, so long as the borrower continues to make scheduled repayments thereon, be subject to the same terms and conditions and qualify for the same benefits and privileges as other loans made under this part.

(5) Limitation

A borrower may obtain the benefits available under this subsection with respect to rehabilitating a loan (whether by loan sale or assignment) only one time per loan.

(b) Satisfactory repayment arrangements to renew eligibility

Each guaranty agency shall establish a program which allows a borrower with a defaulted loan or loans to renew eligibility for all subchapter IV student financial assistance (regardless of whether the defaulted loan has been sold to an eligible lender or assigned to the Secretary) upon the borrower's payment of 6 consecutive monthly payments. The guaranty agency shall not demand from a borrower as a monthly payment amount under this subsection more than is reasonable and affordable based upon the borrower's total financial circumstances. A borrower may only obtain the benefit of this subsection with respect to renewed eligibility once.

(c) Financial and economic literacy

Each program described in subsection (b) shall include making available financial and economic education materials for a borrower who has rehabilitated a loan.

(Pub. L. 89–329, title IV, §428F, as added Pub. L. 99–498, title IV, §402(a), Oct. 17, 1986, 100 Stat. 1394; amended Pub. L. 100–50, §10(u), June 3, 1987, 101 Stat. 346; Pub. L. 101–239, title II, §2005(a), Dec. 19, 1989, 103 Stat. 2116; Pub. L. 102–325, title IV, §420, July 23, 1992, 106 Stat. 534; Pub. L. 103–208, §2(c)(38)–(40), Dec. 20, 1993, 107 Stat. 2466; Pub. L. 105–244, title IV, §421, Oct. 7, 1998, 112 Stat. 1696; Pub. L. 109–171, title VIII, §8014(h), Feb. 8, 2006, 120 Stat. 171; Pub. L. 110–315, title IV, §426, Aug. 14, 2008, 122 Stat. 3235; Pub. L. 111–39, title IV, §402(d)(1), July 1, 2009, 123 Stat. 1941; Pub. L. 113–67, div. A, title V, §501, Dec. 26, 2013, 127 Stat. 1186.)

Amendments

2013—Subsec. (a)(1)(A)(ii). Pub. L. 113–67, §501(1), added cl. (ii) and struck out former cl. (ii) which read as follows: "on or before September 30, 2011, assign the loan to the Secretary if—

"(I) the Secretary has determined that market conditions unduly limit a guaranty agency's ability to sell loans under clause (i); and

"(II) the guaranty agency has been unable to sell loans under clause (i)."

Subsec. (a)(1)(D)(i). Pub. L. 113–67, §501(2), added cl. (i) and struck out former cl. (i) which read as follows: "the guaranty agency—

"(I) shall repay the Secretary 81.5 percent of the amount of the principal balance outstanding at the time of such sale, multiplied by the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and

"(II) may, in order to defray collection costs—

"(aa) charge to the borrower an amount not to exceed 18.5 percent of the outstanding principal and interest at the time of the loan sale; and

"(bb) retain such amount from the proceeds of the loan sale; and".

2009—Subsec. (a)(1). Pub. L. 111–39, §402(d)(1)(A)(i), amended par. (1) generally. Prior to amendment, par. (1) related to the sale of a loan by a guaranty agency or the Secretary.

Subsec. (a)(2). Pub. L. 111–39, §402(d)(1)(A)(ii), substituted "paragraph (1)(A)(i)" for "paragraph (1) of this subsection" and "paragraph (1)(D)(ii)(I)" for "paragraph (1)(B)(ii) of this subsection".

Subsec. (a)(3). Pub. L. 111–39, §402(d)(1)(A)(iii)(II), substituted "sale or assignment." for "sale."

Pub. L. 111–39, §402(d)(1)(A)(iii)(I), which directed substitution of "sold or assigned under paragraph (1)(A)" for "sold under paragraph (2)", was executed by making the substitution for "sold under paragraph (1)" to reflect the probable intent of Congress.

Subsec. (a)(4). Pub. L. 111–39, §402(d)(1)(A)(iv), substituted "that is sold or assigned under paragraph (1)" for "which is sold under paragraph (1) of this subsection".

Subsec. (a)(5). Pub. L. 111–39, §402(d)(1)(A)(v), inserted "(whether by loan sale or assignment)" after "rehabilitating a loan".

Subsec. (b). Pub. L. 111–39, §402(d)(1)(B), inserted "or assigned to the Secretary" after "sold to an eligible lender".

2008—Subsec. (a)(1)(A). Pub. L. 110–315, §426(1)(A), inserted at end "Upon the sale of the loan to an eligible lender, the guaranty agency or other holder of the loan shall request any consumer reporting agency to which the guaranty agency or holder, as applicable, reported the default of the loan, to remove the record of default from the borrower's credit history."

Subsec. (a)(5). Pub. L. 110–315, §426(1)(B), added par. (5).

Subsec. (c). Pub. L. 110–315, §426(2), added subsec. (c).

2006—Subsec. (a)(1)(A). Pub. L. 109–171, §8014(h)(1), substituted "9 payments made within 20 days of the due date during 10 consecutive months" for "consecutive payments for 12 months".

Subsec. (a)(1)(C), (D). Pub. L. 109–171, §8014(h)(2), (3), added subpar. (C) and redesignated former subpar. (C) as (D).

1998—Subsec. (b). Pub. L. 105–244 substituted "Satisfactory repayment arrangements to renew eligibility" for "Special rule" in heading.

1993—Subsec. (a)(2). Pub. L. 103–208, §2(c)(38), substituted "paragraph (1) of this subsection" for "this paragraph" and "this subsection" for "this section".

Subsec. (a)(4). Pub. L. 103–208, §2(c)(39), substituted "paragraph (1) of this subsection" for "this paragraph".

Subsec. (b). Pub. L. 103–208, §2(c)(40), inserted at end "A borrower may only obtain the benefit of this subsection with respect to renewed eligibility once."

1992—Subsec. (a). Pub. L. 102–325, §420(1)–(3), redesignated subsec. (b) as (a), in par. (1)(A) substituted "Each guaranty agency shall enter into an agreement with the Secretary which shall provide that upon" for "Upon" and inserted provision at end that neither the guaranty agency nor the Secretary demand from the borrower as monthly payments more than is reasonable and affordable based upon the borrower's total financial circumstances, in par. (3) inserted "or grants" after "loans", and struck out former subsec. (a) which related to program requirements for the default reduction program.

Subsec. (b). Pub. L. 102–325, §420(4), added subsec. (b). Former subsec. (b) redesignated (a).

1989Pub. L. 101–239 amended section generally, substituting provisions relating to default reduction program for former provisions relating to rehabilitation of defaulted loans.

1987—Subsecs. (b), (c). Pub. L. 100–50 redesignated subsec. (c) as (b) and struck out former subsec. (b) which read as follows: "The loans which shall be eligible for rehabilitation under this section shall be only those loans which are made to borrowers who, at the time of default on the loan, are unemployed or institutionalized."

Effective Date of 2013 Amendment

Pub. L. 113–67, div. A, title V, §501, Dec. 26, 2013, 127 Stat. 1186, provided that the amendments made by section 501 of Pub. L. 113–67 are effective July 1, 2014.

Effective Date of 2009 Amendment

Pub. L. 111–39, title IV, §402(d)(2), July 1, 2009, 123 Stat. 1942, provided that: "The amendments made by paragraph (1) [amending this section] shall be effective on the date of enactment of this Act [July 1, 2009], and shall apply to any loan on which monthly payments described in section 428F(a)(1)(A) [42 U.S.C. 1078–6(a)(1)(A)] were paid before, on, or after such date of enactment."

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 1998 Amendment

Amendment by 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.

Publicity Through Communications Media of Availability of Default Reduction Program

Pub. L. 101–239, title II, §2005(b), Dec. 19, 1989, 103 Stat. 2118, provided that: "The Secretary of Education shall, from funds available through student loan collections, commencing not less than 30 days before the beginning of the default reduction program required by the amendment made by this section [amending this section], and continuing throughout the duration of such program, widely publicize (through various communications media) the availability of the default reduction program."

§1078–7. Requirements for disbursement of student loans

(a) Multiple disbursement required

(1) Two disbursements required

The proceeds of any loan made, insured, or guaranteed under this part that is made for any period of enrollment shall be disbursed in 2 or more installments, none of which exceeds one-half of the loan.

(2) Minimum interval required

The interval between the first and second such installments shall be not less than one-half of such period of enrollment, except as necessary to permit the second installment to be disbursed at the beginning of the second semester, quarter, or similar division of such period of enrollment.

(3) Special rule

An institution whose cohort default rate (as determined under section 1085(m) of this title) for each of the 3 most recent fiscal years for which data are available is less than 10 percent may disburse any loan made, insured, or guaranteed under this part in a single installment for any period of enrollment that is not more than 1 semester, 1 trimester, 1 quarter, or 4 months. Notwithstanding section 422(d) of the Higher Education Amendments of 1998, this paragraph shall be effective beginning on February 8, 2006.

(4) Amendment to special rule

Beginning on October 1, 2011, the special rule under paragraph (3) shall be applied by substituting "15 percent" for "10 percent".

(b) Disbursement and endorsement requirements

(1) First year students

The first installment of the proceeds of any loan made, insured, or guaranteed under this part that is made to a student borrower who is entering the first year of a program of undergraduate education, and who has not previously obtained a loan under this part, shall not (regardless of the amount of such loan or the duration of the period of enrollment) be presented by the institution to the student for endorsement until 30 days after the borrower begins a course of study, but may be delivered to the eligible institution prior to the end of that 30-day period. An institution whose cohort default rate (as determined under section 1085(m) of this title) for each of the three most recent fiscal years for which data are available is less than 10 percent shall be exempt from the requirements of this paragraph. Notwithstanding section 422(d) of the Higher Education Amendments of 1998, the second sentence of this paragraph shall be effective beginning on February 8, 2006.

(2) Other students

The proceeds of any loan made, insured, or guaranteed under this part that is made to any student other than a student described in paragraph (1) shall not be disbursed more than 30 days prior to the beginning of the period of enrollment for which the loan is made.

(3) Amendment to cohort default rate exemption

Beginning on October 1, 2011, the exemption to the requirements of paragraph (1) in the second sentence of such paragraph shall be applied by substituting "15 percent" for "10 percent".

(c) Method of multiple disbursement

Disbursements under subsection (a)—

(1) shall be made in accordance with a schedule provided by the institution (under section 1078(a)(2)(A)(i)(II) of this title) that complies with the requirements of this section;

(2) may be made directly by the lender or, in the case of a loan under sections 1078 and 1078–1 1 of this title, may be disbursed pursuant to the escrow provisions of section 1078(i) of this title; and

(3) notwithstanding subsection (a)(2), may, with the permission of the borrower, be disbursed by the lender on a weekly or monthly basis, provided that the proceeds of the loan are disbursed by the lender in substantially equal weekly or monthly installments, as the case may be, over the period of enrollment for which the loan is made.

(d) Withholding of second disbursement

(1) Withdrawing students

A lender or escrow agent that is informed by the borrower or the institution that the borrower has ceased to be enrolled before the disbursement of the second or any succeeding installment shall withhold such disbursement. Any disbursement which is so withheld shall be credited to the borrower's loan and treated as a prepayment thereon.

(2) Students receiving over-awards

If the sum of a disbursement for any student and the other financial aid obtained by such student exceeds the amount of assistance for which the student is eligible under this subchapter, the institution such student is attending shall withhold and return to the lender or escrow agent the portion (or all) of such installment that exceeds such eligible amount, except that overawards permitted pursuant to section 1087–53(b)(4) of this title shall not be construed to be overawards for purposes of this paragraph. Any portion (or all) of a disbursement installment which is so returned shall be credited to the borrower's loan and treated as a prepayment thereon.

(e) Exclusion of consolidation and foreign study loans

The provisions of this section shall not apply in the case of a loan made under section 1078–3 of this title, or made to a student to cover the cost of attendance in a program of study abroad approved by the home eligible institution if the home eligible institution has a cohort default rate (as calculated under section 1085(m) of this title) of less than 5 percent.

(f) Beginning of period of enrollment

For purposes of this section, a period of enrollment begins on the first day that classes begin for the applicable period of enrollment.

(g) Sales prior to disbursement prohibited

An eligible lender shall not sell or transfer a promissory note for any loan made, insured, or guaranteed under this part until the final disbursement of such loan has been made, except that the prohibition of this subsection shall not apply if—

(1) the sale of the loan does not result in a change in the identity of the party to whom payments will be made for the loan; and

(2) the first disbursement of such loan has been made.

(Pub. L. 89–329, title IV, §428G, as added Pub. L. 101–239, title II, §2004(a), Dec. 19, 1989, 103 Stat. 2115; amended Pub. L. 101–508, title III, §3003(a), Nov. 5, 1990, 104 Stat. 1388–26; Pub. L. 102–325, title IV, §421, July 23, 1992, 106 Stat. 534; Pub. L. 103–66, title IV, §4109(b), Aug. 10, 1993, 107 Stat. 369; Pub. L. 103–208, §2(c)(41), Dec. 20, 1993, 107 Stat. 2466; Pub. L. 105–244, title IV, §422(a)–(c), Oct. 7, 1998, 112 Stat. 1696; Pub. L. 109–171, title VIII, §8010, Feb. 8, 2006, 120 Stat. 164; Pub. L. 110–315, title IV, §427, Aug. 14, 2008, 122 Stat. 3235; Pub. L. 111–39, title IV, §402(f)(4), July 1, 2009, 123 Stat. 1943.)

References in Text

Section 422(d) of the Higher Education Amendments of 1998, referred to in subsecs. (a)(3) and (b)(1), is section 422(d) of Pub. L. 105–244, set out as an Effective and Termination Dates of 1998 Amendment note below.

Section 1078–1 of this title, referred to in subsec. (c)(2), was repealed by Pub. L. 103–66, title IV, §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, §418, Oct. 7, 1998, 112 Stat. 1691.

Codification

Text of subsec. (a)(3) and second sentence of subsec. (b)(1), which was temporarily added by Pub. L. 105–244, §422(a), (b), and then omitted, was restored pursuant to amendment by Pub. L. 109–171, §8010(1), (2). See 1998 and 2006 Amendment notes and Effective and Termination Dates of 1998 Amendment note below.

Amendments

2009—Subsec. (c)(1). Pub. L. 111–39, §402(f)(4)(A), substituted "section 1078(a)(2)(A)(i)(II)" for "section 1078(a)(2)(A)(i)(III)".

Subsec. (c)(3). Pub. L. 111–39, §402(f)(4)(B), added par. (3) and struck out former par. (3) which read as follows: "notwithstanding subsection (a)(2) of this section, may, with the permission of the borrower, be disbursed by the lender on a weekly or monthly basis, provided that the proceeds of the loan are disbursed in substantially equal weekly or monthly installments, as the case may be, over the period of enrollment for which the loan is made."

2008—Subsec. (a)(4). Pub. L. 110–315, §427(a), added par. (4).

Subsec. (b)(3). Pub. L. 110–315, §427(b), added par. (3).

2006—Subsec. (a)(3). Pub. L. 109–171, §8010(1), inserted "Notwithstanding section 422(d) of the Higher Education Amendments of 1998, this paragraph shall be effective beginning February 8, 2006." at end. See Codification note above and Effective and Termination Dates of 1998 Amendment note below.

Subsec. (b)(1). Pub. L. 109–171, §8010(2), inserted "Notwithstanding section 422(d) of the Higher Education Amendments of 1998, the second sentence of this paragraph shall be effective beginning February 8, 2006." at end. See Codification note above and Effective and Termination Dates of 1998 Amendment note below.

Subsec. (e). Pub. L. 109–171, §8010(3), struck out ", made to a student to cover the cost of attendance at an eligible institution outside the United States" after "section 1078–3 of this title".

1998—Subsec. (a)(3). Pub. L. 105–244, §422(a), (d), temporarily added par. (3) which read as follows: "An institution whose cohort default rate (as determined under section 1085(m) of this title) for each of the 3 most recent fiscal years for which data are available is less than 10 percent may disburse any loan made, insured, or guaranteed under this part in a single installment for any period of enrollment that is not more than 1 semester, 1 trimester, 1 quarter, or 4 months." See Codification note and 2006 Amendment note above and Effective and Termination Dates of 1998 Amendment note below.

Subsec. (b)(1). Pub. L. 105–244, §422(b), (d), temporarily inserted at end "An institution whose cohort default rate (as determined under section 1085(m) of this title) for each of the three most recent fiscal years for which data are available is less than 10 percent shall be exempt from the requirements of this paragraph." See Codification note and 2006 Amendment note above and Effective and Termination Dates of 1998 Amendment note below.

Subsec. (e). Pub. L. 105–244, §422(c), substituted ", made to a student" for "or made to a student" and inserted before the period at end ", or made to a student to cover the cost of attendance in a program of study abroad approved by the home eligible institution if the home eligible institution has a cohort default rate (as calculated under section 1085(m) of this title) of less than 5 percent".

1993—Subsec. (c)(3). Pub. L. 103–208 directed the substitution of "disbursed by the lender" for "disbursed" and was executed by making the substitution the first place "disbursed" appeared, to reflect the probable intent of Congress.

Subsec. (e). Pub. L. 103–66 substituted "consolidation" for "PLUS, consolidation," in heading and "section 1078–3" for "section 1078–2 or 1078–3" in text.

1992—Subsec. (c)(3). Pub. L. 102–325, §421(a), added par. (3).

Subsec. (d)(2). Pub. L. 102–325, §421(b), inserted ", except that overawards permitted pursuant to section 1087–53(b)(4) of this title shall not be construed to be overawards for purposes of this paragraph" before period at end of first sentence.

Subsec. (g). Pub. L. 102–325, §421(c), added subsec. (g).

1990—Subsec. (b)(1). Pub. L. 101–508 amended par. (1) generally. Prior to amendment, par. (1) read as follows: "The first installment of the proceeds of any loan made under section 1078–1 of this title that is made to a student borrower who has not successfully completed the first year of a program of undergraduate education shall not (regardless of the amount of such loan or the duration of the period of enrollment) be presented by the institution to the student for endorsement until—

"(A) 30 days after the borrower begins a course of study; and

"(B) the institution certifies that the borrower continues to be enrolled and in attendance at the end of such 30-day period, and is maintaining satisfactory progress;

but may be disbursed to the eligible institution prior to the end of such 30-day period."

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective and Termination Dates of 1998 Amendment

Amendment by section 422(c) 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.

Pub. L. 105–244, title IV, §422(d), Oct. 7, 1998, 112 Stat. 1696, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall be effective during the period beginning on October 1, 1998, and ending on September 30, 2002."

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.

Amendment by Pub. L. 103–66 effective with respect to loans for which the first disbursement is made on or after Oct. 1, 1993, see section 4109(c) of Pub. L. 103–66, set out as a note under section 1078–2 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title III, §3003(b), Nov. 5, 1990, 104 Stat. 1388–26, provided that: "The amendment made by this section [amending this section] shall be effective for loans made on or after the date of enactment of this Act [Nov. 5, 1990] to cover the cost of instruction for periods of enrollment beginning on or after January 1, 1991."

Effective Date

Section applicable with respect to loans made to cover cost of instruction for periods of enrollment beginning on or after Jan. 1, 1990, see section 2004(c) of Pub. L. 101–239, set out as an Effective Date of 1989 Amendment note under section 1077 of this title.

1 See References in Text note below.

§1078–8. Unsubsidized Stafford loans for middle-income borrowers

(a) In general

It is the purpose of this section to authorize insured loans under this part that are first disbursed before July 1, 2010, for borrowers who do not qualify for Federal interest subsidy payments under section 1078 of this title. Except as provided in this section, all terms and conditions for Federal Stafford loans established under section 1078 of this title shall apply to loans made pursuant to this section.

(b) Eligible borrowers

Prior to July 1, 2010, any student meeting the requirements for student eligibility under section 1091 of this title (including graduate and professional students as defined in regulations promulgated by the Secretary) shall be entitled to borrow an unsubsidized Federal Stafford Loan for which the first disbursement is made before such date if the eligible institution at which the student has been accepted for enrollment, or at which the student is in attendance, has—

(1) determined and documented the student's need for the loan based on the student's estimated cost of attendance (as determined under section 1087ll of this title) and the student's estimated financial assistance, including a loan which qualifies for interest subsidy payments under section 1078 of this title; and

(2) provided the lender a statement—

(A) certifying the eligibility of the student to receive a loan under this section and the amount of the loan for which such student is eligible, in accordance with subsection (c); and

(B) setting forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 1078–7 of this title.

(c) Determination of amount of loan

The determination of the amount of a loan by an eligible institution under subsection (b) shall be calculated by subtracting from the estimated cost of attendance at the eligible institution any estimated financial assistance reasonably available to such student. An eligible institution may not, in carrying out the provisions of subsection (b) of this section, provide a statement which certifies the eligibility of any student to receive any loan under this section in excess of the amount calculated under the preceding sentence.

(d) Loan limits

(1) In general

Except as provided in paragraphs (2), (3), and (4), the annual and aggregate limits for loans under this section shall be the same as those established under section 1078(b)(1) of this title, less any amount received by such student pursuant to the subsidized loan program established under section 1078 of this title.

(2) Limits for graduate, professional, and independent postbaccalaureate students

(A) Annual limits

The maximum annual amount of loans under this section a graduate or professional student, or a student described in clause (ii), may borrow in any academic year (as defined in section 1088(a)(2) of this title) or its equivalent shall be the amount determined under paragraph (1), plus—

(i) in the case of such a student who is a graduate or professional student attending an eligible institution, $12,000; and

(ii) notwithstanding paragraph (4), in the case of an independent student, or a dependent student whose parents are unable to borrow under section 1078–2 of this title or the Federal Direct PLUS Loan Program, who has obtained a baccalaureate degree and who is enrolled in coursework specified in paragraph (3)(B) or (4)(B) of section 1091(b) of this title

(I) $7,000 for coursework necessary for enrollment in a graduate or professional program; and

(II) $7,000 for coursework necessary for a professional credential or certification from a State required for employment as a teacher in an elementary or secondary school,


except in cases where the Secretary determines that a higher amount is warranted in order to carry out the purpose of this part with respect to students engaged in specialized training requiring exceptionally high costs of education, but the annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any years in excess of the annual limit.

(B) Aggregate limit

The maximum aggregate amount of loans under this section a student described in subparagraph (A) may borrow shall be the amount described in paragraph (1), adjusted to reflect the increased annual limits described in subparagraph (A), as prescribed by the Secretary by regulation.

(3) Limits for undergraduate dependent students

(A) Annual limits

The maximum annual amount of loans under this section an undergraduate dependent student (except an undergraduate dependent student whose parents are unable to borrow under section 1078–2 of this title or the Federal Direct PLUS Loan Program) may borrow in any academic year (as defined in section 1088(a)(2) of this title) or its equivalent shall be the sum of the amount determined under paragraph (1), plus $2,000.

(B) Aggregate limits

The maximum aggregate amount of loans under this section a student described in subparagraph (A) may borrow shall be $31,000.

(4) Limits for undergraduate independent students

(A) Annual limits

The maximum annual amount of loans under this section an undergraduate independent student, or an undergraduate dependent student whose parents are unable to borrow under section 1078–2 of this title or the Federal Direct PLUS Loan Program, may borrow in any academic year (as defined in section 1088(a)(2) of this title) or its equivalent shall be the sum of the amount determined under paragraph (1), plus—

(i) in the case of such a student attending an eligible institution who has not completed such student's first 2 years of undergraduate study—

(I) $6,000, if such student is enrolled in a program whose length is at least one academic year in length; or

(II) if such student is enrolled in a program of undergraduate education which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as the length of such program measured in semester, trimester, quarter, or clock hours bears to one academic year;


(ii) in the case of such a student at an eligible institution who has successfully completed such first and second years but has not successfully completed the remainder of a program of undergraduate education—

(I) $7,000; or

(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; and


(iii) in the case of such a student enrolled in coursework specified in—

(I) section 1091(b)(3)(B) of this title, $6,000; or

(II) section 1091(b)(4)(B) of this title, $7,000.

(B) Aggregate limits

The maximum aggregate amount of loans under this section a student described in subparagraph (A) may borrow shall be $57,500.

(5) Capitalized interest

Interest capitalized shall not be deemed to exceed a maximum aggregate amount determined under subparagraph (B) of paragraph (2), (3), or (4).

(e) Payment of principal and interest

(1) Commencement of repayment

Repayment of principal on loans made under this section shall begin at the beginning of the repayment period described in section 1078(b)(7) of this title. Not less than 30 days prior to the anticipated commencement of such repayment period, the holder of such loan shall provide notice to the borrower that interest will accrue before repayment begins and of the borrower's option to begin loan repayment at an earlier date.

(2) Capitalization of interest

(A) Except as provided in subparagraph (C), interest on loans made under this section for which payments of principal are not required during the in-school and grace periods or for which payments are deferred under sections 1077(a)(2)(C) and 1078(b)(1)(M) of this title shall, if agreed upon by the borrower and the lender—

(i) be paid monthly or quarterly; or

(ii) be added to the principal amount of the loan by the lender only—

(I) when the loan enters repayment;

(II) at the expiration of a grace period, in the case of a loan that qualifies for a grace period;

(III) at the expiration of a period of deferment or forbearance; or

(IV) when the borrower defaults.


(B) The capitalization of interest described in subparagraph (A) shall not be deemed to exceed the annual insurable limit on account of the student.

(C) Interest shall not accrue on a loan deferred under section 1078(b)(1)(M)(v) or 1077(a)(2)(C)(iv) of this title.

(3) Subsidies prohibited

No payments to reduce interest costs shall be paid pursuant to section 1078(a) of this title on loans made pursuant to this section.

(4) Applicable rates of interest

Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in section 1077a of this title.

(5) Amortization

The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repayment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that—

(A) the amount of the periodic payment will be adjusted annually; or

(B) the period of repayment of principal will be lengthened or shortened,


in order to reflect adjustments in interest rates occurring as a consequence of section 1077a(c)(4) of this title.

(6) Repayment period

For purposes of calculating the repayment period under section 1078(b)(9) of this title, such period shall commence at the time the first payment of principal is due from the borrower.

(7) Qualification for forbearance

A lender may grant the borrower of a loan under this section a forbearance for a period not to exceed 60 days if the lender reasonably determines that such a forbearance from collection activity is warranted following a borrower's request for forbearance, deferment, or a change in repayment plan, or a request to consolidate loans in order to collect or process appropriate supporting documentation related to the request. During any such period, interest on the loan shall accrue but not be capitalized.

(f) Repealed. Pub. L. 105–244, title IV, §423(f), Oct. 7, 1998, 112 Stat. 1698

(g) Single application form and loan repayment schedule

A guaranty agency shall use a single application form and a single repayment schedule for subsidized Federal Stafford loans made pursuant to section 1078 of this title and for unsubsidized Federal Stafford loans made pursuant to this section.

(h) Insurance premium

Each State or nonprofit private institution or organization having an agreement with the Secretary under section 1078(b)(1) of this title may charge a borrower under this section an insurance premium equal to not more than 1.0 percent of the principal amount of the loan, if such premium will not be used for incentive payments to lenders. Effective for loans for which the date of guarantee of principal is on or after July 1, 2006, and that are first disbursed before July 1, 2010, in lieu of the insurance premium authorized under the preceding sentence, each State or nonprofit private institution or organization having an agreement with the Secretary under section 1078(b)(1) of this title shall collect and deposit into the Federal Student Loan Reserve Fund under section 1072a of this title, a Federal default fee of an amount equal to 1.0 percent of the principal amount of the loan, which fee shall be collected either by deduction from the proceeds of the loan or by payment from other non-Federal sources. The Federal default fee shall not be used for incentive payments to lenders.

(Pub. L. 89–329, title IV, §428H, as added Pub. L. 102–325, title IV, §422, July 23, 1992, 106 Stat. 535; amended Pub. L. 103–66, title IV, §§4047(a), 4102(b), Aug. 10, 1993, 107 Stat. 363, 366; Pub. L. 103–208, §2(c)(42)–(45), Dec. 20, 1993, 107 Stat. 2466, 2467; Pub. L. 104–134, title I, §101(d) [title V, §514(a)], Apr. 26, 1996, 110 Stat. 1321–211, 1321-245; renumbered title I, Pub. L. 104–140, §1(a), May 2, 1996, 110 Stat. 1327; Pub. L. 105–244, title IV, §423, Oct. 7, 1998, 112 Stat. 1696; Pub. L. 109–171, title VIII, §§8005(d), 8014(b)(2), Feb. 8, 2006, 120 Stat. 159, 169; Pub. L. 110–227, §2(a), May 7, 2008, 122 Stat. 740; Pub. L. 110–315, title IV, §428(a), Aug. 14, 2008, 122 Stat. 3235; Pub. L. 111–39, title IV, §402(f)(5), July 1, 2009, 123 Stat. 1944; Pub. L. 111–152, title II, §2207, Mar. 30, 2010, 124 Stat. 1076; Pub. L. 115–245, div. B, title III, §309(e), Sept. 28, 2018, 132 Stat. 3106.)

Codification

Amendments by section 2(c)(42), (45) 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.

Amendments

2018—Subsec. (e)(2)(A). Pub. L. 115–245, §309(e)(1), substituted "Except as provided in subparagraph (C), interest" for "Interest" in introductory provisions.

Subsec. (e)(2)(C). Pub. L. 115–245, §309(e)(2), added subpar. (C).

2010—Subsec. (a). Pub. L. 111–152, §2207(1), inserted "that are first disbursed before July 1, 2010," after "under this part".

Subsec. (b). Pub. L. 111–152, §2207(2), substituted "Prior to July 1, 2010, any student" for "Any student" and inserted "for which the first disbursement is made before such date" after "unsubsidized Federal Stafford Loan" in introductory provisions.

Subsec. (h). Pub. L. 111–152, §2207(3), inserted "and that are first disbursed before July 1, 2010," after "July 1, 2006,".

2009—Subsec. (d)(2). Pub. L. 111–39, §402(f)(5)(A), amended heading generally, resulting in text identical to that after execution of the amendment by Pub. L. 110–315, §428(a)(1)(A). See 2008 Amendment note below.

Subsec. (e)(6). Pub. L. 111–39, §402(f)(5)(B), amended par. (6) generally, resulting in text identical to that after execution of the amendment by Pub. L. 105–244, §423(d). See 1998 Amendment note below.

2008—Subsec. (d). Pub. L. 110–227 amended subsec. (d) generally. Prior to amendment, subsec. (d) related to loan limits.

Subsec. (d)(2). Pub. L. 110–315, §428(a)(1)(A), which directed substitution of "Graduate, professional, and independent postbaccalaureate students" for "Graduate and professional students" in heading, was executed by substituting "graduate, professional, and independent postbaccalaureate students" for "graduate and professional students" to reflect the probable intent on Congress.

Subsec. (d)(2)(A). Pub. L. 110–315, §428(a)(1)(B)(i), inserted ", or a student described in clause (ii)," after "graduate or professional student" in introductory provisions.

Subsec. (d)(2)(A)(ii). Pub. L. 110–315, §428(a)(1)(B)(ii), added cl. (ii) and struck out former cl. (ii) which read as follows: "in the case of a graduate student enrolled in coursework specified in sections 1091(b)(3)(B) and 1091(b)(4)(B) of this title, $7,000;".

Subsec. (d)(4)(A)(iii). Pub. L. 110–315, §428(a)(2), added cl. (iii) and struck out former cl. (iii) which read as follows: "in the case of such a student enrolled in coursework specified in sections 1091(b)(3)(B) and 1091(b)(4)(B) of this title, $6,000 for coursework necessary for enrollment in an undergraduate degree or certificate program."

2006—Subsec. (d)(2)(C). Pub. L. 109–171, §8005(d)(1), substituted "$12,000" for "$10,000".

Subsec. (d)(2)(D). Pub. L. 109–171, §8005(d)(2), substituted "$7,000" for "$5,000" in cls. (i) and (ii).

Subsec. (h). Pub. L. 109–171, §8014(b)(2), inserted at end "Effective for loans for which the date of guarantee of principal is on or after July 1, 2006, in lieu of the insurance premium authorized under the preceding sentence, each State or nonprofit private institution or organization having an agreement with the Secretary under section 1078(b)(1) of this title shall collect and deposit into the Federal Student Loan Reserve Fund under section 1072a of this title, a Federal default fee of an amount equal to 1.0 percent of the principal amount of the loan, which fee shall be collected either by deduction from the proceeds of the loan or by payment from other non-Federal sources. The Federal default fee shall not be used for incentive payments to lenders."

1998—Subsec. (b). Pub. L. 105–244, §423(a), amended heading and text of subsec. (b) generally. Prior to amendment, text read as follows: "Any student meeting the requirements for student eligibility under section 1091 of this title (including graduate and professional students as defined in regulations promulgated by the Secretary) shall be entitled to borrow an unsubsidized Stafford loan. Such student shall provide to the lender a statement from the eligible institution at which the student has been accepted for enrollment, or at which the student is in attendance, which—

"(1) sets forth such student's estimated cost of attendance (as determined under section 1087ll of this title);

"(2) sets forth such student's estimated financial assistance, including a loan which qualifies for subsidy payments under section 1078 of this title; and

"(3) certifies the eligibility of the student to receive a loan under this section and the amount of the loan for which such student is eligible, in accordance with subsection (c) of this section."

Subsec. (d)(2). Pub. L. 105–244, §423(b)(1)(A), in introductory provisions, inserted "(as defined in section 1088(a)(2) of this title)" after "academic year" and struck out "or in any period of 7 consecutive months, whichever is longer," after "or its equivalent".

Subsec. (d)(2)(A). Pub. L. 105–244, §423(b)(1)(B), substituted "length; and" for "length (as determined under section 1088 of this title);" in cl. (i), added cl. (ii), and struck out former cls. (ii) and (iii) which read as follows:

"(ii) $2,500, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(iii) $1,500, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year;".

Subsec. (d)(2)(D). Pub. L. 105–244, §423(b)(1)(C), (D), added subpar. (D).

Subsec. (d)(3). Pub. L. 105–244, §423(b)(2), inserted at end "Interest capitalized shall not be deemed to exceed such maximum aggregate amount."

Subsec. (e)(2). Pub. L. 105–244, §423(c), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: "Interest on loans made under this section for which payments of principal are not required during the in-school and grace periods or for which payments are deferred under sections 1077(a)(2)(C) and 1078(b)(1)(M) of this title shall, if agreed upon by the borrower and the lender (A) be paid monthly or quarterly, or (B) be added to the principal amount of the loan not more frequently than quarterly by the lender. Such capitalization of interest shall not be deemed to exceed the annual insurable limit on account of the student."

Subsec. (e)(6). Pub. L. 105–244, §423(d), which directed substitution of "repayment period under section 1078(b)(9) of this title" for "10 year repayment period under section 1078(b)(1)(D) of this title", was executed by making the substitution for "10-year repayment period under section 1078(b)(1)(D) of this title" to reflect the probable intent of Congress.

Subsec. (e)(7). Pub. L. 105–244, §423(e), added par. (7).

Subsec. (f). Pub. L. 105–244, §423(f), struck out heading and text of subsec. (f) which provided for lenders to charge borrowers origination fees on loans.

1996—Subsec. (d)(2). Pub. L. 104–134 substituted semicolon for period at end of subpar. (C) and inserted concluding provisions.

1993—Subsec. (b). Pub. L. 103–66, §4047(a)(1), inserted "(including graduate and professional students as defined in regulations promulgated by the Secretary)" in introductory provisions.

Subsec. (d). Pub. L. 103–66, §4047(a)(2), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: "The annual and aggregate limits for loans under this section shall be the same as those established under section 1078(b)(1) of this title, less any amount received by such student pursuant to the subsidized loan program established under section 1078 of this title."

Subsec. (d)(2)(B). Pub. L. 103–208, §2(c)(42), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "in the case of such a student attending an eligible institution who has completed the first 2 years of undergraduate study but who has not completed the remainder of a program of undergraduate study—

"(i) $5,000, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 1088 of this section);

"(ii) $3,325, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and

"(iii) $1,675, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; and". See Codification note above.

Subsec. (e)(1). Pub. L. 103–208, §2(c)(43), substituted "shall begin at the beginning of the repayment period described in section 1078(b)(7) of this title." for "shall commence 6 months after the month in which the student ceases to carry at least one-half the normal full-time workload as determined by the institution." and inserted at end "Not less than 30 days prior to the anticipated commencement of such repayment period, the holder of such loan shall provide notice to the borrower that interest will accrue before repayment begins and of the borrower's option to begin loan repayment at an earlier date."

Subsec. (e)(4). Pub. L. 103–208, §2(c)(44), substituted "section 1077a" for "section 1077a(e)".

Subsec. (e)(5), (6). Pub. L. 103–66, §4047(a)(3), added pars. (5) and (6).

Subsec. (f). Pub. L. 103–66, §4102(b)(1)(A), substituted "Origination fee" for "Insurance premium" in section catchline.

Subsec. (f)(1). Pub. L. 103–66, §4102(b)(1)(B), (C), struck out reference to insurance premium in heading and in text substituted "an origination fee in the amount of 3.0 percent" for "a combined origination fee and insurance premium in the amount of 6.5 percent" and struck out second sentence which read as follows: "A guaranty agency may not charge an insurance premium on any loan made under this section."

Subsec. (f)(2). Pub. L. 103–66, §4102(b)(1)(D), substituted "origination fee" for "combined fee and premium".

Subsec. (f)(3). Pub. L. 103–66, §4102(b)(1)(E), substituted "origination fee" for "combined origination fee and insurance premium".

Subsec. (f)(4). Pub. L. 103–66, §4102(b)(1)(F), in heading substituted "origination fee" for "insurance premium" and in text substituted "origination fees" for "combined origination fee and insurance premiums" and "to pay" for "and premiums to pay".

Subsec. (f)(5). Pub. L. 103–66, §4102(b)(1)(G), inserted "origination fee and" in heading and in text substituted "do not exceed the combined origination fee under this subsection and the insurance premium under subsection (h) of this section, the Secretary is directed to lower the origination fee and insurance premium accordingly" for "do not exceed the 6.5 percent insurance premium, the Secretary is directed to lower the insurance premium accordingly".

Subsec. (h). Pub. L. 103–208, §2(c)(45), redesignated subsec. (l) as (h). See Codification note above.

Subsec. (l). Pub. L. 103–208, §2(c)(45), redesignated subsec. (l) as (h). See Codification note above.

Pub. L. 103–66, §4102(b)(2), added subsec. (l).

Effective Date of 2018 Amendment

Amendment by Pub. L. 115–245 applicable with respect to loans made on or after Sept. 28, 2018, or in repayment on Sept. 28, 2018, see section 309(f) of Pub. L. 115–245, set out as a note under section 1077 of this title.

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Effective Date of 2008 Amendment

Pub. L. 110–315, title IV, §428(b), Aug. 14, 2008, 122 Stat. 3236, provided that: "The amendments made by this section [amending this section] shall take effect for loans for which the first disbursement is made on or after July 1, 2008."

Pub. L. 110–227, §2(c), May 7, 2008, 122 Stat. 742, provided that: "The amendments made by this section [amending this section] shall be effective for loans first disbursed on or after July 1, 2008."

Effective Date of 2006 Amendment

Amendment by section 8014(b)(2) of Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Amendment by section 8005(d) of Pub. L. 109–171 effective July 1, 2007, see section 8005(e) of Pub. L. 109–171, set out as a note under section 1075 of this title.

Effective Date of 1998 Amendment

Amendment by 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

Pub. L. 104–134, title I, §101(d) [title V, §514(b)], Apr. 26, 1996, 110 Stat. 1321–211, 1321-245, provided that: "The amendments made by subsection (a) [amending this section] shall be effective for loans made to cover the cost of instruction for periods of enrollment beginning on or after July 1, 1996."

Effective Date of 1993 Amendments

Amendment by section 2(c)(42)–(43)(A), (44), (45) of Pub. L. 103–208 effective as if included in the Higher Education Amendments of 1992, Pub. L. 102–325, except as otherwise provided, and amendment by section 2(c)(43)(B) of Pub. L. 103–208 effective on and after Apr. 1, 1994, see section 5(a), (b)(5) of Pub. L. 103–208, set out as a note under section 1051 of this title.

Pub. L. 103–66, title IV, §4047(d), Aug. 10, 1993, 107 Stat. 364, provided that: "Except as otherwise provided herein [see section 4047(c) of Pub. L. 103–66, set out below], the amendments made by this section [amending this section and repealing section 1078–1 of this title] shall take effect on July 1, 1994."

Amendment by section 4102(b) of Pub. L. 103–66 effective July 1, 1994, see section 4102(d) of Pub. L. 103–66, set out as a note under section 1078 of this title.

Effective Date

Section effective with respect to loans made to cover the cost of instruction for periods of enrollment beginning on or after Oct. 1, 1992, see section 432(a)(12) of Pub. L. 102–325, set out as an Effective Date of 1992 Amendment note under section 1078 of this title.

Student Eligibility

Pub. L. 110–227, §2(b), May 7, 2008, 122 Stat. 742, provided that: "Loan limit increases authorized by the amendments made by this section [amending this section] shall be available only to students who meet the requirements of section 484(a) of the Higher Education Act of 1965 (20 U.S.C. 1091(a))."

Continuing Applicability of Terms, Conditions, and Benefits of Loans

Pub. L. 103–66, title IV, §4047(c), Aug. 10, 1993, 107 Stat. 364, provided that: "Notwithstanding the amendments made by this section [amending this section and repealing section 1078–1 of this section], with respect to loans provided under sections 428A [former 20 U.S.C. 1078–1] and 428H of the Act [20 U.S.C. 1078–8] (as such sections existed on the date preceding the date of enactment of this Act [Aug. 10, 1993]) the terms, conditions and benefits applicable to such loans under such sections shall continue to apply to such loans after the date of enactment of this Act."

§1078–9. Repealed. Pub. L. 110–84, title III, §302(a), Sept. 27, 2007, 121 Stat. 796

Section, Pub. L. 89–329, title IV, §428I, as added Pub. L. 102–325, title IV, §422, July 23, 1992, 106 Stat. 536; amended Pub. L. 103–208, §2(c)(46), Dec. 20, 1993, 107 Stat. 2467; Pub. L. 109–171, title VIII, §8014(i), Feb. 8, 2006, 120 Stat. 171, related to special insurance and reinsurance rules.

Effective Date of Repeal

Repeal effective Oct. 1, 2007, except that section as in effect on the day before Sept. 27, 2005, shall apply to eligible lenders that received a designation under subsec. (a) of this section prior to Oct. 1, 2007, for the remainder of the year for which the designation was made, see section 302(c) of Pub. L. 110–84, set out as an Effective Date of 2007 Amendment note under section 1078 of this title.

§1078–10. Loan forgiveness for teachers

(a) Statement of purpose

It is the purpose of this section to encourage individuals to enter and continue in the teaching profession.

(b) Program authorized

The Secretary shall carry out a program, through the holder of the loan, of assuming the obligation to repay a qualified loan amount for a loan made under section 1078 or 1078–8 of this title, in accordance with subsection (c), for any new borrower on or after October 1, 1998, who—

(1) has been employed as a full-time teacher for 5 consecutive complete school years—

(A) in a school or location that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such schools or locations; and

(B) if employed as an elementary school or secondary school teacher, is highly qualified as defined in section 9101 1 of the Elementary Secondary 2 Education Act of 1965 [20 U.S.C. 7801], or meets the requirements of subsection (g)(3); and


(2) is not in default on a loan for which the borrower seeks forgiveness.

(c) Qualified loans amount

(1) In general

The Secretary shall repay not more than $5,000 in the aggregate of the loan obligation on a loan made under section 1078 or 1078–8 of this title that is outstanding after the completion of the fifth complete school year of teaching described in subsection (b)(1). No borrower may receive a reduction of loan obligations under both this section and section 1087j of this title.

(2) Treatment of consolidation loans

A loan amount for a loan made under section 1078–3 of this title may be a qualified loan amount for the purposes of this subsection only to the extent that such loan amount was used to repay a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, or a loan made under section 1078 or 1078–8 of this title for a borrower who meets the requirements of subsection (b), as determined in accordance with regulations prescribed by the Secretary.

(3) Additional amounts for teachers in mathematics, science, or special education

Notwithstanding the amount specified in paragraph (1), the aggregate amount that the Secretary shall repay under this section shall be not more than $17,500 in the case of—

(A) a secondary school teacher—

(i) who meets the requirements of subsection (b); and

(ii) whose qualifying employment for purposes of such subsection is teaching mathematics or science on a full-time basis; and


(B) an elementary school or secondary school teacher—

(i) who meets the requirements of subsection (b);

(ii) whose qualifying employment for purposes of such subsection is as a special education teacher whose primary responsibility is to provide special education to children with disabilities (as those terms are defined in section 1401 of this title); and

(iii) who, as certified by the chief administrative officer of the public or non-profit private elementary school or secondary school in which the borrower is employed, or, in the case of a teacher who is employed by an educational service agency, as certified by the chief administrative officer of such agency, is teaching children with disabilities that correspond with the borrower's special education training and has demonstrated knowledge and teaching skills in the content areas of the elementary school or secondary school curriculum that the borrower is teaching.

(d) Regulations

The Secretary is authorized to issue such regulations as may be necessary to carry out the provisions of this section.

(e) Construction

Nothing in this section shall be construed to authorize any refunding of any repayment of a loan.

(f) List

If the list of schools in which a teacher may perform service pursuant to subsection (b) is not available before May 1 of any year, the Secretary may use the list for the year preceding the year for which the determination is made to make such service determination.

(g) Additional eligibility provisions

(1) Continued eligibility

Any teacher who performs service in a school that—

(A) meets the requirements of subsection (b)(1)(A) in any year during such service; and

(B) in a subsequent year fails to meet the requirements of such subsection,


may continue to teach in such school and shall be eligible for loan forgiveness pursuant to subsection (b).

(2) Prevention of double benefits

No borrower may, for the same service, receive a benefit under both this section and—

(A) section 1078–11 of this title;

(B) section 1087e(m) of this title; or

(C) subtitle D of title I of the National and Community Service Act of 1990 (42 U.S.C. 12601 et seq.).

(3) Private school teachers

An individual who is employed as a teacher in a private school and is exempt from State certification requirements (unless otherwise applicable under State law), may, in lieu of the requirement of subsection (b)(1)(B), have such employment treated as qualifying employment under this section if such individual is permitted to and does satisfy rigorous subject knowledge and skills tests by taking competency tests in the applicable grade levels and subject areas. For such purposes, the competency tests taken by such a private school teacher shall be recognized by 5 or more States for the purpose of fulfilling the highly qualified teacher requirements under section 9101 1 of the Elementary and Secondary Education Act of 1965 [20 U.S.C. 7801], and the score achieved by such teacher on each test shall equal or exceed the average passing score of those 5 States.

(h) "Year" defined

For purposes of this section, the term "year", where applied to service as a teacher, means an academic year as defined by the Secretary.

(Pub. L. 89–329, title IV, §428J, as added Pub. L. 102–325, title IV, §422, July 23, 1992, 106 Stat. 541; amended Pub. L. 103–82, title I, §102(c)(2), Sept. 21, 1993, 107 Stat. 824; Pub. L. 103–208, §2(c)(47)–(51), Dec. 20, 1993, 107 Stat. 2467; Pub. L. 105–244, title IV, §424, Oct. 7, 1998, 112 Stat. 1698; Pub. L. 108–409, §3(a)(1)(A), (b)(1), Oct. 30, 2004, 118 Stat. 2300; Pub. L. 109–171, title VIII, §8013(e)(1), Feb. 8, 2006, 120 Stat. 167; Pub. L. 110–315, title IV, §429, Aug. 14, 2008, 122 Stat. 3236; Pub. L. 111–39, title IV, §402(f)(6), July 1, 2009, 123 Stat. 1944.)

References in Text

Section 9101 of the Elementary and Secondary Education Act of 1965, referred to in subsecs. (b)(1)(B) and (g)(3), was amended by Pub. L. 114–95 and, as so amended, is now section 8101 of the Act and no longer defines "highly qualified". A reference in this section to the term "highly qualified" as defined in section 9101 of the Act is to be treated as a reference to such term under such section 9101 as in effect on the day before the date of enactment of Pub. L. 114–95. See section 9214(a)(1) of Pub. L. 114–95, set out as a Use of the Term "Highly Qualified" in Other Laws note under section 1070g–2 of this title.

The National and Community Service Act of 1990, referred to in subsec. (g)(2)(C), is Pub. L. 101–610, Nov. 16, 1990, 104 Stat. 3127. Subtitle D of title I of the Act is classified generally to division D of subchapter I (§12601 et seq.) of chapter 129 of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see Short Title note set out under section 12501 of Title 42 and Tables.

Amendments

2009—Subsec. (c)(1). Pub. L. 111–39, §402(f)(6)(A), inserted at end "No borrower may receive a reduction of loan obligations under both this section and section 1087j of this title."

Subsec. (g)(2)(B) to (D). Pub. L. 111–39, §402(f)(6)(B), inserted "or" at end of subpar. (B), redesignated subpar. (D) as (C) and substituted "12601" for "12571", and struck out former subpar. (C) which read as follows: "section 1087j of this title; or".

2008—Subsec. (b)(1)(A). Pub. L. 110–315, §429(1), inserted "or location" after "a school" and "or locations" after "schools".

Subsec. (c)(1). Pub. L. 110–315, §429(2), struck out at end "No borrower may receive a reduction of loan obligations under both this section and section 1087j of this title."

Subsec. (c)(3)(B)(iii). Pub. L. 110–315, §429(3), inserted "or, in the case of a teacher who is employed by an educational service agency, as certified by the chief administrative officer of such agency," after "borrower is employed,".

Subsec. (g)(2). Pub. L. 110–315, §429(4), added par. (2) and struck out former par. (2). Prior to amendment, text read as follows: "No borrower may, for the same service, receive a benefit under both this subsection and subtitle D of title I of the National and Community Service Act of 1990 (42 U.S.C. 12571 et seq.)."

2006—Subsec. (b)(1)(B). Pub. L. 109–171, §8013(e)(1)(A), inserted ", or meets the requirements of subsection (g)(3)" before "; and".

Subsec. (g)(3). Pub. L. 109–171, §8013(e)(1)(B), added par. (3).

2004—Subsec. (b)(1). Pub. L. 108–409, §3(a)(1)(A), added subpar. (B) and struck out former subpars. (B) and (C) which read as follows:

"(B) if employed as a secondary school teacher, is teaching a subject area that is relevant to the borrower's academic major as certified by the chief administrative officer of the public or nonprofit private secondary school in which the borrower is employed; and

"(C) if employed as an elementary school teacher, has demonstrated, as certified by the chief administrative officer of the public or nonprofit private elementary school in which the borrower is employed, knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum; and".

Subsec. (c)(3). Pub. L. 108–409, §3(b)(1), added par. (3).

1998Pub. L. 105–244 amended section catchline and text generally. Prior to amendment, section authorized Secretary to carry out demonstration program for loan forgiveness for teachers, individuals performing national community service, and nurses.

1993—Subsec. (b)(1). Pub. L. 103–208, §2(c)(47), substituted "section" for "sections" in introductory provisions.

Pub. L. 103–82, §102(c)(2)(A), substituted "October 1, 1989" for "October 1, 1992" in introductory provisions.

Subsec. (b)(1)(B). Pub. L. 103–208, §2(c)(48), substituted "serves as a full-time volunteer" for "agrees in writing to volunteer for service".

Subsec. (c)(1). Pub. L. 103–208, §2(c)(49), substituted "year of service" for "academic year" wherever appearing.

Subsec. (c)(5). Pub. L. 103–82, §102(c)(2)(B), added par. (5).

Subsec. (d). Pub. L. 103–208, §2(c)(50), substituted "to eligible" for "of eligibility" in heading.

Subsec. (e). Pub. L. 103–208, §2(c)(51), amended subsec. (e) generally. Prior to amendment, subsec. (e) read as follows: "Each eligible individual desiring loan repayment under this section shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may reasonably require."

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

Effective Date of 2004 Amendment; Transition Rule

Pub. L. 108–409, §3(a)(2), Oct. 30, 2004, 118 Stat. 2300, provided that:

"(A) Rule.—The amendments made by paragraph (1) of this subsection to sections 428J(b)(1) and 460(b)(1)(A) of the Higher Education Act of 1965 [sections 1078–10(b)(1) and 1087j(b)(1)(A) of this title] shall not be applied to disqualify any individual who, before the date of enactment of this Act [Oct. 30, 2004], commenced service that met and continues to meet the requirements of such sections as such sections were in effect on the day before the date of enactment of this Act.

"(B) Rule not applicable to increased qualified loan amounts.—Subparagraph (A) of this paragraph shall not apply for purposes of obtaining increased qualified loan amounts under sections 428J(c)(3) and 460(c)(3) of the Higher Education Act of 1965 [sections 1078–10(c)(3) and 1087j(c)(3) of this title] as added by subsection (b) of this section."

Pub. L. 108–409, §3(b)(3), Oct. 30, 2004, 118 Stat. 2301, as amended by Pub. L. 109–150, §2(c)(1), Dec. 30, 2005, 119 Stat. 2884; Pub. L. 109–171, title VIII, §8013(c)(2), (d)(1), Feb. 8, 2006, 120 Stat. 167, provided that: "The amendments made by this subsection [amending this section and section 1087j of this title] shall apply only with respect to eligible individuals who are new borrowers (as such term is defined in 103 of the Higher Education Act of 1965 (20 U.S.C. 1003)) on or after October 1, 1998."

[Pub. L. 109–150, §2(c)(1), which amended section 3(b)(3) of Pub. L. 108–409, set out above, was repealed by Pub. L. 109–171, §8013(d)(1), eff. July 1, 2006.]

[Amendment by Pub. L. 109–150 effective as if enacted on Oct. 1, 2005, see section 2(d)(2) of Pub. L. 109–150, set out as an Effective Date of 2005 Amendment note under section 1087–1 of this title.]

[Amendment by Pub. L. 109–171, §8013(c)(2), effective as if enacted on Oct. 1, 2005, and as if amendment by section 2(c)(1) of Pub. L. 109–150 had not been enacted, see section 8013(c)(3), (d)(2) of Pub. L. 109–171, set out as notes under section 1087–1 of this title.]

Effective Date of 1998 Amendment

Amendment by 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 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.

Amendment by Pub. L. 103–82 effective Oct. 1, 1993, see section 123 of Pub. L. 103–82, set out as a note under section 1701 of Title 16, Conservation.

Information on Benefits to Rural School Districts

Pub. L. 108–409, §3(c), Oct. 30, 2004, 118 Stat. 2302, provided that: "The Secretary shall—

"(1) notify local educational agencies eligible to participate in the Small Rural Achievement Program authorized under subpart 1 of part B of title VI [now V] of the Elementary and Secondary Education Act of 1965 [20 U.S.C. 7345 et seq.] of the benefits available under the amendments made by this section [amending this section and section 1087j of this title]; and

"(2) encourage such agencies to notify their teachers of such benefits."

1 See References in Text note below.

2 So in original. Probably should be preceded by "and".

§1078–11. Loan forgiveness for service in areas of national need

(a) Program authorized

(1) Loan forgiveness authorized

The Secretary shall forgive, in accordance with this section, the qualified loan amount described in subsection (c) of the student loan obligation of a borrower who—

(A) is employed full-time in an area of national need, as described in subsection (b); and

(B) is not in default on a loan for which the borrower seeks forgiveness.

(2) Method of loan forgiveness

To provide loan forgiveness under paragraph (1), the Secretary is authorized to carry out a program—

(A) through the holder of the loan, to assume the obligation to repay a qualified loan amount for a loan made, insured, or guaranteed under this part (other than an excepted PLUS loan or an excepted consolidation loan (as such terms are defined in section 1098e(a) of this title)); and

(B) to cancel a qualified loan amount for a loan made under part D of this subchapter (other than an excepted PLUS loan or an excepted consolidation loan).

(3) Regulations

The Secretary is authorized to issue such regulations as may be necessary to carry out this section.

(b) Areas of national need

For purposes of this section, an individual is employed in an area of national need if the individual meets the requirements of one of the following:

(1) Early childhood educators

The individual is employed full-time as an early childhood educator.

(2) Nurses

The individual is employed full-time—

(A) as a nurse in a clinical setting; or

(B) as a member of the nursing faculty at an accredited school of nursing (as those terms are defined in section 296 of title 42).

(3) Foreign language specialists

The individual—

(A) has obtained a baccalaureate or advanced degree in a critical foreign language; and

(B) is employed full-time—

(i) in an elementary school or secondary school as a teacher of a critical foreign language;

(ii) in an agency of the United States Government in a position that regularly requires the use of such critical foreign language; or

(iii) in an institution of higher education as a faculty member or instructor teaching a critical foreign language.

(4) Librarians

The individual is employed full-time as a librarian in—

(A) a public library that serves a geographic area within which the public schools have a combined average of 30 percent or more of the schools' total student enrollments composed of children meeting a measure of poverty under section 6313(a)(5) of this title; or

(B) a school that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such a school.

(5) Highly qualified teachers serving students who are limited English proficient, low-income communities, and underrepresented populations

The individual—

(A) is highly qualified, as such term is defined in section 9101 1 of the Elementary and Secondary Education Act of 1965 [20 U.S.C. 7801]; and

(B) is employed full-time—

(i) as a teacher educating students who are limited English proficient;

(ii) as a teacher in a school that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such a school;

(iii) as a teacher and is an individual from an underrepresented population in the teaching profession, as determined by the Secretary; or

(iv) as a teacher in an educational service agency, as such term is defined in section 7801 of this title.

(6) Child welfare workers

The individual—

(A) has obtained a degree in social work or a related field with a focus on serving children and families; and

(B) is employed full-time in public or private child welfare services.

(7) Speech-language pathologists and audiologists

The individual—

(A) is employed full-time as a speech-language pathologist or audiologist in an eligible preschool program or a school that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such a school; and

(B) has, at a minimum, a graduate degree in speech-language pathology, audiology, or communication sciences and disorders.

(8) School counselors

The individual—

(A) is employed full-time as a school counselor who has documented competence in counseling children and adolescents in a school setting and who—

(i) is licensed by the State or certified by an independent professional regulatory authority;

(ii) in the absence of such State licensure or certification, possesses national certification in school counseling or a specialty of counseling granted by an independent professional organization; or

(iii) holds a minimum of a master's degree in school counseling from a program accredited by the Council for Accreditation of Counseling and Related Educational Programs or the equivalent; and


(B) is so employed in a school that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such a school.

(9) Public sector employees

The individual is employed full-time in—

(A) public safety (including as a first responder, firefighter, police officer, or other law enforcement or public safety officer);

(B) emergency management (including as an emergency medical technician);

(C) public health (including full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics); or

(D) public interest legal services (including prosecution, public defense, or legal advocacy in low-income communities at a nonprofit organization).

(10) Nutrition professionals

The individual—

(A) is a licensed, certified, or registered dietician who has completed a degree in a relevant field; and

(B) is employed full-time as a dietician with an agency of the special supplemental nutrition program for women, infants, and children under section 1786 of title 42.

(11) Medical specialists

The individual—

(A) has received a degree from a medical school at an institution of higher education; and

(B) has been accepted to, or currently participates in, a full-time graduate medical education training program or fellowship (or both) to provide health care services (as recognized by the Accreditation Council for Graduate Medical Education) that—

(i) requires more than five years of total graduate medical training; and

(ii) has fewer United States medical school graduate applicants than the total number of positions available in such program or fellowship.

(12) Mental health professionals

The individual—