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Part B of title IV of the Higher Education Act of 1965, comprising this part, was originally enacted by
§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
(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
(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
(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
(2) there are authorized to be appropriated, for payments under
(3) there is authorized to be appropriated the sum of $17,500,000 for making advances pursuant to
(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
(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
(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
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
(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.
(
References in Text
The Higher Education Amendments of 1986, referred to in subsec. (b), is
Codification
Another section 411 of
Prior Provisions
A prior section 1071,
Amendments
2010—Subsec. (b).
Subsec. (d).
2008—Subsec. (b)(6).
2006—Subsec. (b)(5).
1998—Subsec. (d).
1992—Subsec. (c).
Subsec. (d).
1988—Subsec. (c).
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1988 Amendment
"(a)
"(b)
"(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
"(4) Allotments to States made under chapters 1 and 2 of title I of the Elementary and Secondary Education Act of 1965 [formerly
"(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 (
"(A) Programs under subchapter D of
"(B) National programs under the Adult Education Act [formerly
"(C) Programs under the Indian Education Act [
"(D) Programs under title II of the Education for Economic Security Act [formerly
"(E) The program under section 702 of the McKinney-Vento Homeless Assistance Act [formerly
"(6) The provisions of part A of title II of this Act [§§2001 to 2034 of
"(7) The amendments made by section 6001 [amending
"(8) Any election under section 5209(b)(1) [
Effective Date
"(b)
"(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 [
"(3) the changes made in sections 425(a), 428(b)(1)(A), and 428(b)(1)(B) of the Act [
"(4) the changes made in subsections (a), (b), and (d) of section 433 of the Act [
"(5) the changes in section 428(b)(1)(H) [
"(6) the changes in sections 435(d)(5) and 438(d) of the Act [
"(7) the changes made in section 438(b) [
"(c)
"(d)
Study of Role of Guaranty Agencies
General Accounting Office Reports
§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
(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
(b) Limitations on total advances
(1) In general
The total of the advances from the sums appropriated pursuant to paragraph (4)(A) of
(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
(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
(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
(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
(B) in the case of a State which enters into an agreement pursuant to
(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
(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
(B) if the Secretary is seeking to terminate the guaranty agency's agreement, or assuming the guaranty agency's functions, in accordance with
(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
(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
(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
(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
(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
(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
(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
(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.
(
Codification
Amendment by
Prior Provisions
A prior section 1072,
Amendments
1998—Subsec. (a)(2).
Subsec. (c)(6)(B)(i).
Subsec. (c)(7)(A).
Subsec. (c)(7)(B).
Subsec. (g)(1).
Subsec. (i).
1997—Subsec. (h).
1993—Subsec. (c)(7).
Subsec. (c)(7)(B).
Subsec. (g).
1992—Subsec. (a)(2).
Subsec. (c)(5), (7).
Subsecs. (e), (f).
1987—Subsec. (e).
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1987 Amendment
§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
(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
(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
(3) insurance premiums collected from borrowers pursuant to
(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
(2) to pay into the Agency Operating Fund established pursuant to
(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
(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
(
References in Text
Amendments
2008—Subsec. (d)(1).
Effective Date
Section effective Oct. 1, 1998, except as otherwise provided in
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
(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
(4) the default aversion fee paid in accordance with
(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
(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
(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
(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
(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
(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
(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.
(
References in Text
Effective Date
Section effective Oct. 1, 1998, except as otherwise provided in
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
(b) Exceptions
The Secretary may issue certificates of insurance under
(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
(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.
(
Prior Provisions
A prior section 1073,
§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
(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.
(
Prior Provisions
A prior section 1074,
Amendments
2010—Subsec. (a).
2008—Subsec. (a).
2006—Subsec. (a).
1998—Subsec. (a).
1997—Subsec. (a).
1992—Subsec. (a).
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
§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
(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
(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
(C) The applicable date with respect to a loan made by an eligible lender as described in
(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
(D) the original principal amount of loans repaid by the Secretary under
(3) Payments to assignees
For the purpose of this subsection, payments by the Secretary under
(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
(
References in Text
Prior Provisions
A prior section 1075,
Amendments
2006—Subsec. (a)(1)(A)(i)(I).
Subsec. (a)(1)(A)(ii)(I).
1998—Subsec. (a)(1)(A)(i)(I).
Subsec. (a)(1)(A)(i)(II), (III).
"(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).
1993—Subsec. (a)(1)(A)(ii), (iii).
"(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
"(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
"(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).
Subsec. (a)(1)(C).
1992—Subsec. (a)(1)(A).
"(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).
"(i) $17,250, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under
"(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
1987—Subsec. (a)(2)(A)(i).
Subsec. (a)(2)(A)(ii).
Effective Date of 2006 Amendment
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by section 2(c)(2) of
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
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
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.
(
Prior Provisions
A prior section 1076,
§1077. Eligibility of student borrowers and terms of federally insured student loans
(a) List of requirements
Except as provided in
(1) made to a student who (A) is an eligible student under
(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
(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
(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
(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
(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
(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
(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
(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.
(
Prior Provisions
A prior section 1077,
Amendments
2018—Subsec. (a)(2)(C)(iv).
2008—Subsec. (a)(2)(G)(i).
Subsec. (a)(2)(G)(ii).
1993—Subsec. (a)(2)(C)(i).
1992—Subsec. (a)(2)(A).
"(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).
Subsec. (a)(2)(G) to (I).
Subsec. (a)(3).
Subsec. (c).
1991—Subsec. (a)(2)(A).
Subsec. (d).
1989—Subsec. (a)(2)(C)(i).
Subsec. (a)(4).
1988—Subsec. (a)(2)(C)(v).
Subsec. (a)(2)(C)(vii).
Subsec. (b)(2).
1987—Subsec. (a)(2)(C)(vi).
Subsec. (a)(2)(C)(vii).
Subsec. (a)(4).
Effective Date of 2018 Amendment
"(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
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1989 Amendment
Effective Date of 1988 Amendment
Amendment by section 5(b)(1) of
Effective Date of 1987 Amendment
Amendment by section 10(b) of
Amendment by
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
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
(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
(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
(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
(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
(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
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
(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
(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
(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
(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
(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
(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
(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
(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
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
(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
(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
(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
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
(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
(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
(2) PLUS loans
Notwithstanding subsection (h), with respect to any loan under
(3) Consolidation loans
With respect to any consolidation loan under
(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
(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
(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.
(
References in Text
Codification
Amendments by section 2(c)(6)–(10) of
Prior Provisions
A prior section 1077a,
Amendments
2010—Subsec. (l).
Subsec. (l)(1), (2).
Subsec. (l)(3).
Subsec. (l)(4).
Subsec. (l)(4)(D), (E).
"(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).
2006—Subsec. (l)(2).
2002—Subsec. (k).
Subsecs. (l) to (n).
2000—Subsec. (c)(4)(B).
"(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).
Subsec. (k).
Subsec. (l).
Subsec. (m).
1993—Subsec. (c)(4)(E).
Subsec. (e)(1).
Subsecs. (f) to (h).
Subsec. (i).
Subsec. (i)(1)(B).
Subsec. (i)(2)(B).
Subsec. (i)(4)(B).
Subsec. (i)(5).
Subsec. (i)(7).
Subsecs. (j), (k).
1992—Subsec. (c)(4)(D).
Subsec. (e).
Subsecs. (f) to (h).
1987—Subsec. (c)(4)(A).
Subsec. (c)(4)(B).
"(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
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1998 Amendment
Effective Date of 1993 Amendment
Amendment by section 2(c)(5) of
Effective Date of 1987 Amendment
Amendment by
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
(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
(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
(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 [
(bb) any veterans' education benefits as defined in
(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
(3) Amount of interest subsidy
(A)(i) Subject to
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(B) In the case of a loan made under
(C) In the case of a loan made under
(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
(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
(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
(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
(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
(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
(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
(4) Definitions
For the purpose of this subsection, the terms "insurance beneficiary" and "default" have the meanings assigned to them by
(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
(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
(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
(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
(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
(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
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
(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
(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
(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
(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
(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
(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
(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 and NOAA Commissioned Officer Corps student loan interest payment programs
(1) Authority
Using funds received by transfer to the Secretary under
(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
(
References in Text
The National and Community Service Act of 1990, referred to in subsec. (a)(2)(C)(ii)(II)(aa), is
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
The Higher Education Amendments of 1992, referred to in subsec. (c)(3)(A)(i)(I), is
The National and Community Service Trust Act of 1993, referred to in subsec. (c)(3)(A)(i)(III), is
Codification
Amendments by section 2(c)(17), (26), (27) of
Prior Provisions
A prior section 1078,
A prior section 1078a,
Amendments
2020—Subsec. (o).
Subsec. (o)(1).
2018—Subsec. (b)(1)(M)(v).
2015—Subsec. (c)(1)(A).
2011—Subsec. (a)(3)(A)(i)(I).
2010—Subsec. (a)(1).
Subsec. (a)(5).
Subsec. (b)(1)(G).
Subsec. (b)(1)(G)(ii).
Subsec. (b)(1)(H)(ii).
Subsec. (f)(1)(A)(ii).
Subsec. (j)(1).
2009—Subsec. (a)(2)(A)(i)(II).
Subsec. (b)(1)(G)(i).
Subsec. (b)(1)(M)(i).
Subsec. (b)(3)(A)(i).
Subsec. (b)(3)(C), (D).
Subsec. (b)(4).
Subsec. (b)(7)(B).
Subsec. (b)(7)(D).
Subsec. (c)(9)(K).
2008—Subsec. (a)(2)(C).
"(i) a student's cost of attendance shall be determined under
"(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
"(II) any veterans' education benefits paid because of enrollment in a postsecondary education institution, including veterans' education benefits (as defined in
"(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).
Subsec. (b)(1)(G)(i).
Subsec. (b)(1)(L)(i).
Subsec. (b)(1)(Y)(i).
"(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).
Subsec. (b)(2)(F)(i)(V) to (VII).
Subsec. (b)(3).
"(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
"(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).
Subsec. (b)(9)(A)(v).
Subsec. (c)(2)(H)(i).
Subsec. (c)(3)(A)(iii).
Subsec. (c)(3)(C)(iii), (iv).
Subsec. (c)(9)(K).
Subsec. (d).
Subsec. (e).
"(1) that all borrowers are eligible for income-sensitive repayment, including through loan consolidation under
"(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).
Subsec. (h).
Subsec. (j)(1).
Subsec. (j)(2)(B).
Subsec. (j)(2)(C) to (E).
Subsec. (j)(3)(C).
Subsec. (j)(4), (5).
Subsec. (j)(6).
Subsec. (j)(7).
Subsec. (j)(8), (9).
Subsec. (j)(9)(A)(ii).
Subsec. (j)(9)(A)(ii)(III).
Subsec. (j)(9)(A)(iii).
Subsec. (k)(4).
Subsec. (m).
Subsec. (m)(1).
Subsec. (m)(2).
Subsec. (n)(4).
2007—Subsec. (b)(1)(G).
Subsec. (b)(1)(M)(iii).
Subsec. (c)(1)(D) to (H).
Subsec. (c)(6)(A)(ii).
2006—Subsec. (a)(3)(A)(v)(III).
Subsec. (a)(5).
Subsec. (b)(1)(A)(i)(I).
Subsec. (b)(1)(A)(ii)(I).
Subsec. (b)(1)(G).
Subsec. (b)(1)(H).
Subsec. (b)(1)(M)(iii), (iv).
Subsec. (b)(1)(N)(ii), (iii).
Subsec. (b)(7)(A).
"(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).
Subsec. (c)(1)(G), (H).
Subsec. (c)(2)(A).
Subsec. (c)(2)(D).
Subsec. (c)(3)(A)(i).
Subsec. (c)(6).
Subsec. (c)(10).
Subsec. (i)(1).
2002—Subsec. (c)(3)(A)(i)(IV).
Subsec. (c)(3)(A)(ii)(II).
Subsec. (c)(3)(C).
Subsec. (o).
1998—Subsec. (a)(2)(A)(i).
"(I) sets forth such student's estimated cost of attendance (as determined under
"(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
Subsec. (a)(2)(B).
Subsec. (a)(2)(C).
"(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
"(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).
Subsec. (a)(5).
Subsec. (b)(1)(A).
Subsec. (b)(1)(A)(i)(I).
Subsec. (b)(1)(A)(i)(II), (III).
"(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).
Subsec. (b)(1)(D)(ii).
Subsec. (b)(1)(E).
"(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
"(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).
Subsec. (b)(1)(L)(i).
Subsec. (b)(1)(M)(i)(I).
Subsec. (b)(1)(M)(ii).
Subsec. (b)(1)(U)(i)(I), (ii).
Subsec. (b)(1)(U)(iii)(I).
Subsec. (b)(1)(X).
Subsec. (b)(1)(Y).
Subsec. (b)(3).
Subsec. (b)(3)(C).
Subsec. (b)(7)(D).
Subsec. (b)(9).
Subsec. (c)(1)(A).
Subsec. (c)(1)(B)(i).
Subsec. (c)(1)(B)(ii).
Subsec. (c)(1)(E)(i).
Subsec. (c)(1)(E)(ii).
Subsec. (c)(1)(E)(iii).
Subsec. (c)(1)(F)(i).
Subsec. (c)(1)(F)(ii).
Subsec. (c)(1)(F)(iii).
Subsec. (c)(2)(A).
Subsec. (c)(2)(G).
Subsec. (c)(2)(H)(ii).
Subsec. (c)(3)(A)(i).
Subsec. (c)(3)(D).
Subsec. (c)(6).
Subsec. (c)(8).
Subsec. (c)(9)(A).
Subsec. (c)(9)(C).
Subsec. (c)(9)(E)(iv).
Subsec. (c)(9)(E)(v).
Subsec. (c)(9)(E)(vi).
Subsec. (c)(9)(F)(vii).
Subsec. (c)(9)(I).
Subsec. (c)(9)(K).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Subsec. (j)(3).
Subsec. (j)(3)(A).
Subsec. (j)(3)(C).
Subsec. (l).
"(1)
"(2)
Subsec. (m)(1).
Subsec. (n).
1997—Subsec. (a)(5).
Subsec. (c)(9)(A).
"(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).
1993—Subsec. (a)(2)(C)(i).
Subsec. (a)(2)(E).
Subsec. (b)(1)(A)(ii), (iii).
"(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
"(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
"(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).
Subsec. (b)(1)(B).
Subsec. (b)(1)(D).
Subsec. (b)(1)(G).
Subsec. (b)(1)(H).
Subsec. (b)(1)(N).
Subsec. (b)(1)(U).
Subsec. (b)(1)(V).
Subsec. (b)(1)(W).
"(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.
Subsec. (b)(1)(X).
Subsec. (b)(1)(Y).
Subsec. (b)(1)(Z).
Subsec. (b)(2)(F)(i).
Subsec. (b)(2)(F)(ii).
Subsec. (b)(7).
"(A) In the case of a loan made under
"(B) In the case of a loan made under
"(C) In the case of a loan made under
Subsec. (b)(8).
Subsec. (c)(1)(A).
Subsec. (c)(1)(B), (E), (F).
Subsec. (c)(2)(G).
Subsec. (c)(3)(A).
Subsec. (c)(6)(A)(ii).
Subsec. (c)(8).
Subsec. (c)(9).
Subsec. (c)(10).
Subsec. (c)(10)(C).
Subsec. (c)(10)(D).
Subsec. (c)(10)(E)(iv) to (vi).
Subsec. (c)(10)(F).
Subsec. (c)(10)(F)(v).
Subsec. (c)(10)(F)(vi), (vii).
Subsec. (c)(10)(G).
Subsec. (c)(10)(H) to (J).
Subsec. (c)(10)(K).
Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (e)(2)(A).
Subsec. (e)(3).
Subsec. (e)(5).
Subsec. (f)(1)(A).
Subsec. (f)(1)(B).
Subsec. (j)(2).
Subsec. (j)(2)(A) to (E).
Subsec. (j)(3).
Subsec. (l)(2).
Subsec. (m).
Subsec. (n).
1992—Subsec. (a)(2)(C).
"(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
"(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).
Subsec. (a)(5).
Subsec. (a)(7).
Subsec. (b)(1)(A).
Subsec. (b)(1)(A)(i) to (iv).
"(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).
"(i) $17,250, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under
"(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
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).
"(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).
Subsec. (b)(1)(M).
Subsec. (b)(1)(N).
Subsec. (b)(1)(T).
"(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).
Subsec. (b)(1)(V).
Subsec. (b)(1)(W) to (Y).
Subsec. (b)(2)(C).
Subsec. (b)(2)(D)(i).
Subsec. (b)(2)(E).
Subsec. (b)(2)(F).
Subsec. (b)(3)(B) to (D).
Subsec. (b)(4).
Subsec. (b)(5).
Subsec. (b)(6).
Subsec. (b)(7).
Subsec. (c)(1)(A).
Subsec. (c)(1)(D).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(7)(A).
Subsec. (c)(7)(B).
Subsec. (c)(7)(C).
Subsec. (c)(8).
Subsec. (c)(10).
Subsec. (f)(1)(A)(i).
Subsec. (f)(1)(C).
Subsec. (j).
Subsec. (k)(3).
Subsec. (m).
1991—Subsec. (a)(2)(A)(iii).
Subsec. (a)(2)(F).
Subsec. (b)(1)(W).
Subsec. (b)(1)(X).
Subsec. (c)(6)(D).
1990—Subsec. (a)(2)(F).
Subsec. (c)(1)(A).
Subsec. (c)(6)(C).
Subsec. (l).
1989—Subsec. (a)(2)(A)(i)(III).
Subsec. (b)(1)(M)(i).
Subsec. (b)(1)(O).
Subsec. (b)(1)(T)(i).
Subsec. (b)(1)(U).
Subsec. (b)(1)(V).
Subsec. (c)(3).
1988—Subsec. (b)(1)(M)(v).
Subsec. (b)(1)(M)(vii).
Subsec. (b)(1)(O).
1987—Subsec. (a)(2)(D).
Subsec. (b)(1)(A)(i).
Subsec. (b)(1)(B)(i).
Subsec. (b)(1)(B)(ii).
Subsec. (b)(1)(M)(vi).
Subsec. (b)(1)(M)(vii).
Subsec. (b)(1)(N).
Subsec. (b)(1)(O).
Subsec. (b)(1)(O)(i).
Subsec. (b)(1)(P).
Subsec. (b)(1)(T).
Subsec. (b)(5).
Subsec. (b)(6)(A).
Subsec. (b)(6)(B)(ii).
Subsec. (c)(1)(A).
Subsec. (c)(6)(C)(iv).
Subsec. (c)(6)(D).
Subsec. (c)(9)(A).
Subsec. (c)(9)(A)(i), (ii).
Subsec. (c)(9)(D).
Subsec. (f)(1)(B).
Subsec. (i)(1).
Subsec. (j).
Subsec. (k)(1).
Effective Date of 2018 Amendment
Amendment by
Effective Date of 2011 Amendment
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
Amendment by sections 202(a), (d) and 301 of
Effective Date of 2006 Amendment
Amendment by
Amendment by section 8005(b) of
Effective Date of 2002 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by section 417(a), (b), (c)(2)–(k) of
Effective Date of 1994 Amendment
Effective Date of 1993 Amendments
Amendment by section 2(c)(11), (12), (14)–(17), (22)–(28) of
Amendment by
Effective Date of 1992 Amendment
"(a)
"(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) [
"(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) [
"(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) [
"(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 [
"(12) that section 428H [
"(13) that the changes made in section 438 [
"(14) that the changes in section 439(d)(1) [
"(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)
Effective Date of 1989 Amendment
Amendment by section 2002(a)(2) of
Amendment by section 2004(b)(1), (3) of
Effective Date of 1988 Amendment
Amendment by section 11(a) of
Amendment by section 5(b)(2) of
Effective Date of 1987 Amendments
Amendment by section 10(b) of
Amendment by
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
Construction of 2006 Amendment
Review of Inducements Limitations
Guaranteed Student Loan Family Contribution Schedule for the Periods of Instruction Beginning After June 30, 1983
1 See References in Text note below.
2 So in original. The period probably should be a semicolon.
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
(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
(C) the Federal default fee required by
(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
(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
(ii) consumer education programs described in
(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
(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
(
References in Text
Paragraph (2) of subsec. (a) of this section, referred to in subsecs. (a)(1) and (c)(3), was struck out by
Prior Provisions
A prior section 1078–1,
Another prior section 1078–1,
Amendments
2008—Subsec. (a)(3).
Subsec. (c)(2), (3).
Subsec. (c)(5).
2006—Subsec. (a)(1)(B).
Subsec. (a)(1)(C).
Subsec. (a)(2), (3).
Subsec. (a)(4).
Effective Date of 2006 Amendment
Amendment by
Effective Date
Section effective Oct. 1, 1998, see section 3 of
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
(c) PLUS loan disbursement
All loans made under this section shall be disbursed in accordance with the requirements of
(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
(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
(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
(4) Applicable rates of interest
Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in
(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
(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
(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
(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
(2) social security number in the same manner as social security numbers are verified for students under
(
Prior Provisions
A prior section 1078–2,
Amendments
2010—Subsec. (a)(1).
2009—Subsec. (e)(3)(B).
Subsec. (e)(5).
2008—Subsec. (a)(3).
Subsec. (a)(3)(B)(i)(II).
Subsec. (d)(1), (2).
2006—Subsec. (a)(1).
Subsec. (a)(1)(A).
Subsec. (a)(1)(B).
Subsec. (a)(1)(C).
Subsec. (b).
Subsec. (c)(2).
Subsec. (d)(1).
1998—Subsec. (a).
Subsec. (d)(4).
Subsec. (f).
1993—Subsec. (c).
1992—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
"(1)
"(2)
Subsec. (e).
1987—Subsec. (a).
Subsec. (b)(3).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(5).
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by
Amendment by section 3(a) of
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by section 416(a)(2) of
Amendment by section 419 of
Effective Date of 1993 Amendment
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Amendment of Note or Other Written Evidence of Loan by Eligible Lender at Request of Borrower; Circumstances; Denial of Request
§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
(B) State agencies described in subparagraphs (D) and (F) of
(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
(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
(ii) at the time of application for a consolidation loan—
(I) is in repayment status as determined under
(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
(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
(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
(cc) for the purpose of using the no accrual of interest for active duty service members benefit offered under
(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 [
(E) made under part E of title VIII of the Public Health Service Act [
(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
(cc) the periods during which the borrower's student loan repayments are deferred under
(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
(III) the occupations listed in
(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
(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
(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
(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
(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
(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
(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
(ii) on or after July 1, 2006, and that is disbursed before July 1, 2010, the applicable interest rate shall be determined under
(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
(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
(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
(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 [
(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
(B) No interest subsidy rule
No interest subsidy under
(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 [
(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
(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
(
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,
Codification
Amendments by section 2(c)(33), (36) of
Prior Provisions
A prior section 1078–3,
Amendments
2010—Subsec. (a)(4)(A).
Subsec. (b)(1)(E).
Subsec. (b)(5).
Subsec. (c)(1)(A)(ii).
Subsec. (c)(1)(C).
Subsec. (e).
2009—Subsec. (a)(4)(E).
Subsec. (c)(2)(A).
Subsec. (c)(3)(A).
Subsec. (d)(3)(D).
Subsec. (f)(3).
2008—Subsec. (a)(3)(B)(i)(V)(cc).
Subsec. (b)(1)(F), (G).
Subsec. (b)(4)(E)(i).
Subsec. (b)(4)(E)(ii).
Subsec. (b)(5).
Subsec. (c)(2)(A).
Subsec. (c)(3).
Subsec. (e).
2007—Subsec. (a)(3)(B)(i)(V).
Subsec. (a)(3)(B)(i)(V)(aa).
Subsec. (b)(5).
2006—Subsec. (a)(3)(A)(ii)(I).
Subsec. (a)(3)(B)(i).
Subsec. (a)(3)(B)(i)(V).
Subsec. (a)(3)(C).
"(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).
Subsec. (b)(5).
Subsec. (e).
2002—Subsec. (c)(1)(A).
1998—Subsec. (a)(3).
Subsec. (a)(4)(C).
Subsec. (b)(1)(A)(i).
Subsec. (b)(4)(C)(ii).
Subsec. (b)(6)(A).
Subsec. (c)(1).
Subsec. (e).
Subsec. (f)(2), (3).
1997—Subsec. (a)(4)(C) to (E).
Subsec. (b)(4)(C)(ii)(I).
Subsec. (b)(4)(C)(ii)(II), (III).
Subsec. (b)(6).
Subsec. (c)(1)(A).
Subsec. (c)(1)(D).
Subsec. (e).
1996—Subsec. (a)(1)(A).
1994—Subsec. (a)(4)(D).
1993—Subsec. (a)(3).
Subsec. (a)(3)(A).
"(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).
Subsec. (a)(4)(A).
Subsec. (a)(4)(C).
Subsec. (b)(1)(A), (E), (F).
Subsec. (b)(4)(C).
Subsec. (b)(5).
Subsec. (c)(1)(B), (C).
"(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).
Subsec. (c)(2)(B), (C).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B).
Subsec. (f).
1992—
Subsec. (a)(3)(A)(i).
Subsec. (a)(3)(A)(ii).
Subsec. (a)(3)(B).
Subsec. (a)(3)(C).
Subsec. (a)(4)(A).
Subsec. (b)(4)(C).
Subsec. (c)(2)(A).
"(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).
Subsec. (e).
1987—Subsec. (a)(1)(C).
Subsec. (a)(3)(A).
Subsec. (a)(3)(B).
Subsec. (a)(4)(A).
Subsec. (b)(1)(C).
Subsec. (c)(2)(A)(v).
Subsec. (c)(5).
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
"(1)
"(2)
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by section 416(b)(2) of
Amendment by section 420 of
Effective Date of 1996 Amendment
Effective Date of 1993 Amendments
Amendment by
Effective Date of 1992 Amendments
Amendment by
Effective Date of 1987 Amendment
Amendment by
Selection of Student Loan Servicer
Pending Applicants
Cost Evaluation Report
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.
(
§1078–5. Repealed. Pub. L. 102–164, title VI, §605(b)(1), Nov. 15, 1991, 105 Stat. 1068
Section,
§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
(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
(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
(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
(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.
(
Amendments
2013—Subsec. (a)(1)(A)(ii).
"(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).
"(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).
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (b).
2008—Subsec. (a)(1)(A).
Subsec. (a)(5).
Subsec. (c).
2006—Subsec. (a)(1)(A).
Subsec. (a)(1)(C), (D).
1998—Subsec. (b).
1993—Subsec. (a)(2).
Subsec. (a)(4).
Subsec. (b).
1992—Subsec. (a).
Subsec. (b).
1989—
1987—Subsecs. (b), (c).
Effective Date of 2013 Amendment
Effective Date of 2009 Amendment
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Publicity Through Communications Media of Availability of 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
(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
(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
(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
(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
(e) Exclusion of consolidation and foreign study loans
The provisions of this section shall not apply in the case of a loan made under
(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.
(
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
Codification
Text of subsec. (a)(3) and second sentence of subsec. (b)(1), which was temporarily added by
Amendments
2009—Subsec. (c)(1).
Subsec. (c)(3).
2008—Subsec. (a)(4).
Subsec. (b)(3).
2006—Subsec. (a)(3).
Subsec. (b)(1).
Subsec. (e).
1998—Subsec. (a)(3).
Subsec. (b)(1).
Subsec. (e).
1993—Subsec. (c)(3).
Subsec. (e).
1992—Subsec. (c)(3).
Subsec. (d)(2).
Subsec. (g).
1990—Subsec. (b)(1).
"(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
Effective Date of 2006 Amendment
Amendment by
Effective and Termination Dates of 1998 Amendment
Amendment by section 422(c) of
Effective Date of 1993 Amendments
Amendment by
Amendment by
Effective Date of 1990 Amendment
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
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
(b) Eligible borrowers
Prior to July 1, 2010, any student meeting the requirements for student eligibility under
(1) determined and documented the student's need for the loan based on the student's estimated cost of attendance (as determined under
(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
(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
(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
(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
(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
(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
(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)
(II)
(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
(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
(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
(3) Subsidies prohibited
No payments to reduce interest costs shall be paid pursuant to
(4) Applicable rates of interest
Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in
(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
(6) Repayment period
For purposes of calculating the repayment period under
(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
(h) Insurance premium
Each State or nonprofit private institution or organization having an agreement with the Secretary under
(
Codification
Amendments by section 2(c)(42), (45) of
Amendments
2018—Subsec. (e)(2)(A).
Subsec. (e)(2)(C).
2010—Subsec. (a).
Subsec. (b).
Subsec. (h).
2009—Subsec. (d)(2).
Subsec. (e)(6).
2008—Subsec. (d).
Subsec. (d)(2).
Subsec. (d)(2)(A).
Subsec. (d)(2)(A)(ii).
Subsec. (d)(4)(A)(iii).
2006—Subsec. (d)(2)(C).
Subsec. (d)(2)(D).
Subsec. (h).
1998—Subsec. (b).
"(1) sets forth such student's estimated cost of attendance (as determined under
"(2) sets forth such student's estimated financial assistance, including a loan which qualifies for subsidy payments under
"(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).
Subsec. (d)(2)(A).
"(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).
Subsec. (d)(3).
Subsec. (e)(2).
Subsec. (e)(6).
Subsec. (e)(7).
Subsec. (f).
1996—Subsec. (d)(2).
1993—Subsec. (b).
Subsec. (d).
Subsec. (d)(2)(B).
"(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).
Subsec. (e)(4).
Subsec. (e)(5), (6).
Subsec. (f).
Subsec. (f)(1).
Subsec. (f)(2).
Subsec. (f)(3).
Subsec. (f)(4).
Subsec. (f)(5).
Subsec. (h).
Subsec. (l).
Effective Date of 2018 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Amendment by section 8014(b)(2) of
Amendment by section 8005(d) of
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1996 Amendment
Effective Date of 1993 Amendments
Amendment by section 2(c)(42)–(43)(A), (44), (45) of
Amendment by section 4102(b) of
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
Student Eligibility
Continuing Applicability of Terms, Conditions, and Benefits of Loans
§1078–9. Repealed. Pub. L. 110–84, title III, §302(a), Sept. 27, 2007, 121 Stat. 796
Section,
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
§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
(1) has been employed as a full-time teacher for 5 consecutive complete school years—
(A) in a school or location that qualifies under
(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 [
(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
(2) Treatment of consolidation loans
A loan amount for a loan made under
(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
(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)
(B)
(C) subtitle D of title I of the National and Community Service Act of 1990 (
(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 [
(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.
(
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
The National and Community Service Act of 1990, referred to in subsec. (g)(2)(C), is
Amendments
2009—Subsec. (c)(1).
Subsec. (g)(2)(B) to (D).
2008—Subsec. (b)(1)(A).
Subsec. (c)(1).
Subsec. (c)(3)(B)(iii).
Subsec. (g)(2).
2006—Subsec. (b)(1)(B).
Subsec. (g)(3).
2004—Subsec. (b)(1).
"(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).
1998—
1993—Subsec. (b)(1).
Subsec. (b)(1)(B).
Subsec. (c)(1).
Subsec. (c)(5).
Subsec. (d).
Subsec. (e).
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 2004 Amendment; Transition Rule
"(A)
"(B)
[
[Amendment by
[Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1993 Amendments
Amendment by
Amendment by
Information on Benefits to Rural School Districts
"(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 [
"(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
(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
(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
(B) a school that qualifies under
(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 [
(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
(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
(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
(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
(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
(11) Medical specialists
The individual—