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Federal Coordination and Compliance Section

20 USC 1078

TITLE 20--EDUCATION

CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE

SUBCHAPTER IV--STUDENT ASSISTANCE

Part B--Federal Family Education Loan Program

 

Jump to the relevant civil rights provision

Sec. 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--
(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) of this section 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) of this section) 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) of this section,

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 such student's estimated cost of
attendance (as determined under section 1087ll of this
title);
(II) sets forth such student's estimated financial
assistance; and
(III) sets forth a schedule for disbursement of the
proceeds of the loan in installments, consistent with the
requirements of section 1078-7 of this title;

(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 provided the lender
with a statement evidencing a determination of need for a loan (as
determined under part E of this subchapter) and the amount of such
need, subject to the provisions of subparagraph (D).
(C) For the purpose of paragraph (1) and this paragraph--
(i) a student's estimated financial assistance means, for
the period for which the loan is sought, the amount of
assistance such student will receive under subpart 1 of part A
of this subchapter (as determined in accordance with section
1091(b) of this title), subpart 3 of part A of this subchapter,
and part C of subchapter I of chapter 34 of title 42 and part D
of this subchapter, and any veterans' education benefits paid
because of enrollment in a postsecondary education institution,
including veterans' education benefits (as defined in section
1087vv(c) of this title), plus other scholarship, grant, or loan
assistance; and
(ii) the determination of need and of the amount of a loan
by an eligible institution under subparagraph (B) with respect
to a student shall be calculated in accordance with part E of
this subchapter.

(D) An eligible institution may not, in carrying out the
provisions of subparagraphs (A) and (B) of this paragraph, provide a
statement which certifies the eligibility of any student to receive
any loan under this part in excess of the maximum amount applicable
to such loan.
(E) For the purpose of subparagraphs (B) and (C) of this
paragraph, any loan obtained by a student under section 1078-1 \1\
or 1078-8 of this title or a parent under section 1078-2 of this
title or under any State-sponsored or private loan program for an
academic year for which the determination is made may be used to
offset the expected family contribution of the student for that
year.
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(F) Except as provided in subparagraph (D), an eligible
institution may refuse to certify a statement which permits a
student to receive a loan under this part or to certify a loan
amount that is less than the student's determination of need (as
determined under part E of this subchapter), if the reason for such
action is documented and provided in written form to each student so
affected.

(3) Amount of interest subsidy

(A)(i) Subject to section 1087-1(c) of this title, the portion
of the interest on a loan which a student is entitled to have paid,
on behalf of and for the account of the student, to the holder of
the loan pursuant to paragraph (1) of this subsection shall be equal
to the total amount of the interest on the unpaid principal amount
of the loan--
(I) which accrues prior to the beginning of the repayment
period of the loan, or
(II) which accrues during a period in which principal need
not be paid (whether or not such principal is in fact paid) by
reason of a provision described in subsection (b)(1)(M) of this
section or in section 1077(a)(2)(C) of this title.

(ii) Such portion of the interest on a loan shall not exceed,
for any period, the amount of the interest on that loan which is
payable by the student after taking into consideration the amount of
any interest on that loan which the student is entitled to have paid
on his or her behalf for that period under any State or private loan
insurance program.
(iii) The holder of a loan with respect to which payments are
required to be made under this section shall be deemed to have a
contractual right, as against the United States, to receive from the
Secretary the portion of interest which has been so determined
without administrative delay after the receipt by the Secretary of
an accurate and complete request for payment pursuant to paragraph
(4).
(iv) The Secretary shall pay this portion of the interest to the
holder of the loan on behalf of and for the account of the borrower
at such times as may be specified in regulations in force when the
applicable agreement entered into pursuant to subsection (b) of this
section 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; or
(II) in the case of a loan disbursed by electronic funds
transfer, 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) of this section,
(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) of this
section 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 September 30, 2002, except that, in the case of a loan made
or insured under a student loan or loan insurance program to enable
a student who has obtained a prior loan made or insured under such
program to continue his or her education program, such period shall
end at the close of September 30, 2006.

(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) of this section if the Secretary determines that
the student loan insurance program--
(A) authorizes the insurance in any academic year or its
equivalent (as determined under regulations of the Secretary)
for any student who is carrying at an eligible institution or in
a program of study abroad approved for credit by the eligible
home institution at which such student is enrolled at least one-
half the normal full-time academic workload (as determined by
the institution) in any amount up to a maximum of--
(i) in the case of a student at an eligible institution
who has not successfully completed the first year of a
program of undergraduate education--
(I) $2,625, if such student is enrolled in a program
whose length is at least one academic year in length (as
determined under section 1088 of this title);
(II) $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;

(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) $3,500; 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; and
(v) in the case of a graduate or professional student
(as defined in regulations of the Secretary) at an eligible
institution, $8,500;

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 \2\ or 1078-2 of
this title; and
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(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 \2\ 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 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, 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) of this section;
(E) subject to subparagraphs (D) and (L), and except as
provided by subparagraph (M), provides that--
(i) not more than 6 months prior to the date on which
the borrower's first payment is due, the lender shall offer
the borrower of a loan made, insured, or guaranteed under
this section or section 1078-1 \2\ of this title, the option
of repaying the loan in accordance with a graduated or
income-sensitive repayment schedule established by the
lender and in accordance with regulations of the Secretary;
and
(ii) repayment of loans shall be in installments over a
period of not less than 5 years (unless the student, during
the 6 months immediately preceding the start of the
repayment period, specifically requests that repayment be
made over a shorter period) nor more than 10 years
commencing at the beginning of the repayment period
determined under paragraph (7) of this subsection;

(F) authorizes interest on the unpaid balance of the loan at
a yearly rate not in excess (exclusive of any premium for
insurance which may be passed on to the borrower) of the rate
required by section 1077a of this title;
(G) insures not less than 98 percent of the unpaid principal
of loans insured under the program, except that such program
shall insure 100 percent of the unpaid principal of loans made
with funds advanced pursuant to subsection (j) of this section
or section 1087-2(q) of this title;
(H) provides for collection of a single insurance premium
equal to not more than 1.0 percent of the principal amount of
the loan, by deduction proportionately from each installment
payment of the proceeds of the loan to the borrower, and insures
that the proceeds of the premium will not be used for incentive
payments to lenders;
(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) of this section;
(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) 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); 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; 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 \3\ 1078-2 or 1078-3 of this title), while
serving in a medical internship or residency program;
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(ii) not in excess of 3 years during which the borrower
is seeking and unable to find full-time employment; or
(iii) not in excess of 3 years for any reason which the
lender determines, in accordance with regulations prescribed
by the Secretary under section 1085(o) of this title, has
caused or will cause the borrower to have an economic
hardship;

(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; or
(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 or at an eligible foreign institution,
are, at the request of the student, disbursed directly to
the student by the means described in clause (i), unless
such student requests that the check be endorsed, or the
funds transfer authorized, pursuant to an authorized power-
of-attorney;

(O) provides that the proceeds of the loans will be
disbursed in accordance with the requirements of section 1078-7
of this title;
(P) requires the borrower to notify the institution
concerning any change in local address during enrollment and
requires the borrower and the institution at which the borrower
is in attendance promptly to notify the holder of the loan,
directly or through the guaranty agency, concerning (i) any
change of permanent address, (ii) when the student ceases to be
enrolled on at least a half-time basis, and (iii) any other
change in status, when such change in status affects the
student's eligibility for the loan;
(Q) provides for the guarantee of loans made to students and
parents under sections 1078-1 \4\ and 1078-2 of this title;
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(R) with respect to lenders which are eligible institutions,
provides for the insurance of loans by only such institutions as
are located within the geographic area served by such guaranty
agency;
(S) provides no restrictions with respect to the insurance
of loans for students who are otherwise eligible for loans under
such program if such a student is accepted for enrollment in or
is attending an eligible institution within the State, or if
such a student is a legal resident of the State and is accepted
for enrollment in or is attending an eligible institution
outside that State;
(T) authorizes (i) the limitation of the total number of
loans or volume of loans, made under this part to students
attending a particular eligible institution during any academic
year; and (ii) the limitation, suspension, or termination of the
eligibility of an eligible institution if--
(I) such institution is ineligible for the emergency
action, limitation, suspension, or termination of eligible
institutions under regulations issued by the Secretary or is
ineligible pursuant to criteria, rules, or regulations
issued under the student loan insurance program which are
substantially the same as regulations with respect to
emergency action, limitation, suspension, or termination of
such eligibility issued by the Secretary;
(II) there is a State constitutional prohibition
affecting the eligibility of such an institution;
(III) such institution fails to make timely refunds to
students as required by regulations issued by the Secretary
or has not satisfied within 30 days of issuance a final
judgment obtained by a student seeking such a refund;
(IV) such institution or an owner, director, or officer
of such institution is found guilty in any criminal, civil,
or administrative proceeding, or such institution or an
owner, director, or officer of such institution is found
liable in any civil or administrative proceeding, regarding
the obtaining, maintenance, or disbursement of State or
Federal grant, loan, or work assistance funds; or
(V) such institution or an owner, director, or officer
of such institution has unpaid financial liabilities
involving the improper acquisition, expenditure, or refund
of State or Federal financial assistance funds;

except that, if a guaranty agency limits, suspends, or
terminates the participation of an eligible institution, the
Secretary shall apply that limitation, suspension, or
termination to all locations of such institution, unless the
Secretary finds, within 30 days of notification of the action by
the guaranty agency, that the guaranty agency's action did not
comply with the requirements of this section;
(U) provides (i) for the eligibility of all lenders
described in section 1085(d)(1) of this title under reasonable
criteria, unless (I) that lender is eliminated as a lender under
regulations for the emergency action,,\5\ limitation,
suspension, or termination of a lender under the Federal student
loan insurance program or is eliminated as a lender pursuant to
criteria issued under the student loan insurance program which
are substantially the same as regulations with respect to such
eligibility as a lender issued under the Federal student loan
insurance program, or (II) there is a State constitutional
prohibition affecting the eligibility of a lender, (ii)
assurances that the guaranty agency will report to the Secretary
concerning changes in such criteria, including any procedures in
effect under such program to take emergency action,,\5\ limit,
suspend, or terminate lenders, and (iii) for (I) a compliance
audit of each lender at least once a year and covering the
period since the most recent audit, conducted by a qualified,
independent organization or person in accordance with standards
established by the Comptroller General for the audit of
governmental organizations, programs, and functions, and as
prescribed in regulations of the Secretary, the results of which
shall be submitted to the Secretary, or (II) with regard to a
lender that is audited under chapter 75 of title 31, such audit
shall be deemed to satisfy the requirements of subclause (I) for
the period covered by such audit, except that the Secretary may
waive the requirements of this clause (iii) if the lender
submits to the Secretary the results of an audit conducted for
other purposes that the Secretary determines provides the same
information as the audits required by this clause;
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(V) provides authority for the guaranty agency to require a
participation agreement between the guaranty agency and each
eligible institution within the State in which it is designated,
as a condition for guaranteeing loans made on behalf of students
attending the institution;
(W) provides assurances that the agency will implement all
requirements of the Secretary for uniform claims and procedures
pursuant to section 1082(l) of this title; and
(X) provides information to the Secretary in accordance with
subsection (c)(10) of this section and maintains reserve funds
determined by the Secretary to be sufficient in relation to such
agency's guarantee obligations.

(2) Contents of insurance program agreement

Such an agreement shall--
(A) provide that the holder of any such loan will be
required to submit to the Secretary, at such time or times and
in such manner as the Secretary may prescribe, statements
containing such information as may be required by or pursuant to
regulation for the purpose of enabling the Secretary to
determine the amount of the payment which must be made with
respect to that loan;
(B) include such other provisions as may be necessary to
protect the United States from the risk of unreasonable loss and
promote the purpose of this part, including such provisions as
may be necessary for the purpose of section 1087 of this title,
and as are agreed to by the Secretary and the guaranty agency,
as the case may be;
(C) provide for making such reports, in such form and
containing such information, including financial information, as
the Secretary may reasonably require to carry out the
Secretary's functions under this part and protect the financial
interest of the United States, and for keeping such records and
for affording such access thereto as the Secretary may find
necessary to assure the correctness and verification of such
reports;
(D) provide for--
(i) conducting, except as provided in clause (ii),
financial and compliance audits of the guaranty agency on at
least an annual basis and covering the period since the most
recent audit, conducted by a qualified, independent
organization or person in accordance with standards
established by the Comptroller General for the audit of
governmental organizations, programs, and functions, and as
prescribed in regulations of the Secretary, the results of
which shall be submitted to the Secretary; or
(ii) with regard to a guaranty program of a State which
is audited under chapter 75 of title 31, deeming such audit
to satisfy the requirements of clause (i) for the period of
time covered by such audit;

(E)(i) provide that any guaranty agency may transfer loans
which are insured under this part to any other guaranty agency
with the approval of the holder of the loan and such other
guaranty agency; and
(ii) provide that the lender (or the holder of the loan)
shall, not later than 120 days after the borrower has left the
eligible institution, notify the borrower of the date on which
the repayment period begins; and
(F) provide that, if the sale, other transfer, or assignment
of a loan made under this part to another holder will result in
a change in the identity of the party to whom the borrower must
send subsequent payments or direct any communications concerning
the loans, then--
(i) the transferor and the transferee will be required,
not later than 45 days from the date the transferee acquires
a legally enforceable right to receive payment from the
borrower on such loan, either jointly or separately to
provide a notice to the borrower of--
(I) the sale or other transfer;
(II) the identity of the transferee;
(III) the name and address of the party to whom
subsequent payments or communications must be sent; and
(IV) the telephone numbers of both the transferor
and the transferee; and

(ii) the transferee will be required to notify the
guaranty agency, and, upon the request of an institution of
higher education, the guaranty agency shall notify the last
such institution the student attended prior to the beginning
of the repayment period of any loan made under this part,
of--
(I) any sale or other transfer of the loan; and
(II) the address and telephone number by which
contact may be made with the new holder concerning
repayment of the loan,

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

(3) Restrictions on inducements, mailings, and advertising

A guaranty agency shall not--
(A) offer, directly or indirectly, premiums, payments, or
other inducements to any educational institution or its
employees in order to secure applicants for loans under this
part;
(B) offer, directly or indirectly, any premium, incentive
payment, or other inducement to any lender, or any agent,
employee, or independent contractor of any lender or guaranty
agency, in order to administer or market loans made under this
part (other than a loan made under section 1078-8 of this title
or a loan made as part of a guaranty agency's lender-of-last-
resort program) for the purpose of securing the designation of
that guaranty agency as the insurer of such loans;
(C) conduct unsolicited mailings to students enrolled in
secondary school of student loan application forms; or
(D) conduct fraudulent or misleading advertising concerning
loan availability.

(4) Special rule

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

(5) Guaranty agency information transfers

(A) Until such time as the Secretary has implemented section
1092b of this title and is able to provide to guaranty agencies the
information required by such section, any guaranty agency may
request information regarding loans made after January 1, 1987, to
students who are residents of the State for which the agency is the
designated guarantor, from any other guaranty agency insuring loans
to such students.
(B) Upon a request pursuant to subparagraph (A), a guaranty
agency shall provide--
(i) the name and the social security number of the borrower;
and
(ii) the amount borrowed and the cumulative amount borrowed.

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

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

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

(7) Repayment period

(A) In the case of a loan made under section 1077 of this title
or this section, the repayment period shall exclude any period of
authorized deferment or forbearance and shall begin--
(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.

(B) In the case of a loan made under section 1078-8 of this
title, the repayment period shall exclude any period of authorized
deferment or forbearance, and shall begin as described in clause (i)
or (ii) of subparagraph (A), but interest shall begin to accrue or
be paid by the borrower on the day the loan is disbursed.
(C) In the case of a loan made under section 1078-1,\6\ 1078-2,
or 1078-3 of this title, the repayment period shall begin on the day
the loan is disbursed, or, if the loan is disbursed in multiple
installments, on the day of the last such disbursement, and shall
exclude any period of authorized deferment or forbearance.
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\6\ See References in Text note below.
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(8) Means of disbursement of loan proceeds

Nothing in this subchapter and part C of subchapter I of chapter
34 of title 42 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.

(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 98 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 45 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 88 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 78 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) Reimbursements of losses made by the Secretary on loans
submitted for claim by an eligible lender, servicer, or guaranty
agency designated for exceptional performance under section 1078-9
of this title shall not be subject to additional review by the
Secretary or repurchase by the guaranty agency for any reason other
than a determination by the Secretary that the eligible lender,
servicer, or guaranty agency engaged in fraud or other purposeful
misconduct in obtaining designation for exceptional performance.
(E) 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 ``98 percent'';
(ii) subparagraph (B)(i) by substituting ``100 percent'' for
``88 percent''; and
(iii) subparagraph (B)(ii) by substituting ``100 percent''
for ``78 percent''.

(F) 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 ``98 percent'';
(ii) subparagraph (B)(i) by substituting ``90 percent'' for
``88 percent''; and
(iii) subparagraph (B)(ii) by substituting ``80 percent''
for ``78 percent''.

(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 a requirement that
each beneficiary of insurance on the loan submit proof that
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);
(B) shall provide for making such reports, in such form and
containing such information, as the Secretary may reasonably
require to carry out the Secretary's functions under this
subsection, and for keeping such records and for affording such
access thereto as the Secretary may find necessary to assure the
correctness and verification of such reports;
(C) shall set forth adequate assurances that, with respect
to so much of any loan insured under the loan insurance program
as may be guaranteed by the Secretary pursuant to this
subsection, the undertaking of the Secretary under the guaranty
agreement is acceptable in full satisfaction of State law or
regulation requiring the maintenance of a reserve;
(D) shall provide that if, after the Secretary has made
payment under the guaranty agreement pursuant to paragraph (1)
of this subsection with respect to any loan, any payments are
made in discharge of the obligation incurred by the borrower
with respect to such loan (including any payments of interest
accruing on such loan after such payment by the Secretary),
there shall be paid over to the Secretary (for deposit in the
fund established by section 1081 of this title) such proportion
of the amounts of such payments as is determined (in accordance
with paragraph (6)) to represent his equitable share thereof,
but (i) shall provide for subrogation of the United States to
the rights of any insurance beneficiary only to the extent
required for the purpose of paragraph (8); and (ii) except as
the Secretary may otherwise by or pursuant to regulation
provide, amounts so paid by a borrower on such a loan shall be
first applied in reduction of principal owing on such loan;
(E) shall set forth adequate assurance that an amount equal
to each payment made under paragraph (1) will be promptly
deposited in or credited to the accounts maintained for the
purpose of section 1072(c) of this title;
(F) set forth adequate assurances that the guaranty agency
will not engage in any pattern or practice which results in a
denial of a borrower's access to loans under this part because
of the borrower's race, sex, color, religion, national origin,
age, handicapped status, income, attendance at a particular
eligible institution within the area served by the guaranty
agency, length of the borrower's educational program, or the
borrower's academic year in school;
(G) shall prohibit the Secretary from making any
reimbursement under this subsection to a guaranty agency when a
default claim is based on an inability to locate the borrower,
unless the guaranty agency, at the time of filing for
reimbursement, certifies to the Secretary that diligent attempts
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 preclaims assistance activities have been
requested under subsection (l) of this section;
(ii) the guaranty agency may require the payment by the
institution of a reasonable fee (as determined in accordance
with regulations prescribed by the Secretary) for such
information; and
(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 written request, a lender shall grant a
borrower forbearance, renewable at 12-month intervals, on
terms agreed to in writing by the parties to the loan with
the approval of the insurer, and otherwise consistent with
the regulations of the Secretary, if the borrower--
(I) is serving in a medical or dental internship or
residency program, the successful completion of which is
required to begin professional practice or service, or
is serving in a medical or dental internship or
residency program leading to a degree or certificate
awarded by an institution of higher education, a
hospital, or a health care facility that offers
postgraduate training, provided that if the borrower
qualifies for a deferment under section
1077(a)(2)(C)(vii) of this title or subsection
(b)(1)(M)(vii) of this section as in effect prior to the
enactment of the Higher Education Amendments of 1992, or
section 1077(a)(2)(C) of this title or subsection
(b)(1)(M) of this section as amended by such amendments,
the borrower has exhausted his or her eligibility for
such deferment;
(II) has a debt burden under this subchapter and
part C of subchapter I of chapter 34 of title 42 that
equals or exceeds 20 percent of income; or
(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;

(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) 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 credit bureau organization 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; and
(C) shall contain provisions that specify that the form of
forbearance granted by the lender for purposes of this paragraph
shall be the temporary cessation of payments, unless the
borrower selects forbearance in the form of an extension of time
for making payments, or smaller payments than were previously
scheduled.

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) of this
section or section 1077(a)(2)(C) of this title, and (ii) if the
borrower is less than 60 days delinquent on such loans at the time
of sale or transfer, forbearances for borrowers on loans which are
sold or transferred.

(4) Definitions

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

(5) Applicability to existing loans

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

(6) Secretary's equitable share

(A) For the purpose of paragraph (2)(D), the Secretary's
equitable share of payments made by the borrower shall be that
portion of the payments remaining after the guaranty agency with
which the Secretary has an agreement under this subsection has
deducted from such payments--
(i) a percentage amount equal to the complement of the
reinsurance percentage in effect when payment under the guaranty
agreement was made with respect to the loan; and
(ii) an amount equal to 27 percent of such payments (subject
to subparagraph (D) of this paragraph) for costs related to the
student loan insurance program, including the administrative
costs of collection of loans reimbursed under this subsection,
the administrative costs of preclaims assistance for default
prevention, the administrative costs of supplemental preclaims
assistance for default prevention, and the administrative costs
of monitoring the enrollment and repayment status of students
(as such terms are defined in subparagraph (B) or (C) of this
paragraph).

(B) For the purpose of this paragraph and subsection (f) of this
section, the term--
(i) ``administrative costs of collection of loans'' means
any administrative costs incurred by a guaranty agency which are
directly related to the collection of the loan on which a
default claim has been paid to the participating lender,
including the attributable compensation of collection personnel
(and in the case of personnel who perform several functions for
such an agency only the portion of the compensation attributable
to the collection activity), attorney's fees, fees paid to
collection agencies, postage, equipment, supplies, telephone and
similar charges, but does not include the overhead costs of such
agency whether or not attributable;
(ii) ``administrative costs of preclaim assistance for
default prevention'' means any administrative costs incurred by
a guaranty agency which 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 the
attributable compensation of appropriate personnel (and in the
case of personnel who perform several functions for such an
agency only the portion of compensation attributable to the
collection activity), fees paid to locate a missing borrower,
postage, equipment, supplies, telephone and similar charges, but
does not include the overhead costs of such agency whether or
not attributable; and
(iii) ``administrative costs of monitoring the enrollment
and repayment status of students'' means any administrative
costs by a guaranty agency which are directly related to
ascertaining the student's enrollment status, 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,

subject to such additional criteria as the Secretary may by
regulation prescribe.
(C)(i) For the purpose of subsection (l) of this section,
``administrative costs of supplemental preclaims assistance'' means
(subject to divisions (ii) through (iv)) any administrative costs--
(I) incurred by a guaranty agency in connection with a loan
on which the guarantor has exercised preclaims assistance
generally comparable in intensiveness to the level of preclaims
assistance performed, prior to the 120th day of delinquency, by
the guaranty agency as of October 16, 1990, and which has been
in delinquent status for at least 120 days; and
(II) which are directly related to providing collection
assistance to the lender on a delinquent loan, prior to a claim
being filed with the guaranty agency,

including the attributable compensation of appropriate personnel
(and in the case of personnel who perform several functions, only
the portion of compensation attributable to the collection
assistance), fees paid to locate a missing borrower, postage,
equipment, supplies, telephone, and similar charges, but does not
include overhead costs.
(ii) The administrative costs for which payment under subsection
(l) of this section is authorized under this subparagraph must be
clearly supplemental to the preclaim assistance for default
prevention described in division (i)(I) of this subparagraph.
(iii) The services associated with carrying out this
subparagraph may be provided by the guaranty agency directly or
under contract, except that such services may not be carried out by
an organization or entity (other than the guaranty agency)--
(I) that is the holder or servicer of the loan or an
organization or entity that owns or controls the holder or
servicer of the loan;
(II) that is owned or controlled by the same corporation,
partnership, association, or individual that owns or controls
the holder or servicer of the loan; or
(III) that is an organization or entity that has a contract
with a guaranty agency to perform collection activities with
respect to the same loans in the event of default.

(iv) In the case of accounts brought into repayment status as a
result of performing supplemental preclaims assistance, the cost of
such assistance is a permissible charge to the borrower (for the
cost of collection) for which the borrower shall be liable.

(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) of this
section 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

(A) 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.
(B) An orderly transition from the Federal Family Education Loan
Program under this part to the Federal Direct Student Loan Program
under part C of this subchapter shall be deemed to be in the Federal
fiscal interest, and a guaranty agency shall promptly assign loans
to the Secretary under this paragraph upon the Secretary's request.

(9) Guaranty agency reserve level

(A) Each guaranty agency which has entered into an agreement
with the Secretary pursuant to this subsection shall maintain a
current minimum reserve level of at least .5 percent of the total
attributable amount of all outstanding loans guaranteed by such
agency. For purposes of this paragraph, such total attributable
amount does not include amounts of outstanding loans transferred to
the guaranty agency from another guaranty agency pursuant to a plan
of the Secretary in response to the insolvency of the latter such
guaranty agency.
(B) The Secretary shall collect, on an annual basis, information
from each guaranty agency having an agreement under this subsection
to enable the Secretary to evaluate the financial solvency of each
such agency. The information collected shall include the level of
such agency's current reserves, cash disbursements and accounts
receivable.
(C) If (i) any guaranty agency falls below the required minimum
reserve level in any 2 consecutive years, (ii) any guaranty agency's
Federal reimbursement payments are reduced to 80 percent pursuant to
subsection (c)(1)(B)(ii) of this section, 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, as appropriate, the guaranty agency to
submit and implement a management plan acceptable to the Secretary
within 30 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;
(v) the Secretary determines that such action is necessary
to ensure the continued availability of loans to student or
parent borrowers; or
(vi) the Secretary determines that such action is necessary
to ensure an orderly transition from the loan programs under
this part to the direct student loan programs under part C of
this subchapter.

(F) If a guaranty agency's agreement under this subsection is
terminated pursuant to subparagraph (E), then the Secretary shall
assume responsibility for all functions of the guaranty agency under
the loan insurance program of such agency. In performing such
functions the Secretary is authorized to--
(i) permit the transfer of guarantees to another guaranty
agency;
(ii) revoke the reinsurance agreement of the guaranty agency
at a specified date, so as to require the merger, consolidation,
or termination of the guaranty agency;
(iii) transfer guarantees to the Department of Education for
the purpose of payment of such claims and process such claims
using the claims standards of the guaranty agency, if such
standards are determined by the Secretary to be in compliance
with this chapter;
(iv) design and implement a plan to restore the guaranty
agency's viability;
(v) provide the guaranty agency with additional advance
funds in accordance with section 1072(c)(7) of this title, with
such restrictions on the use of such funds as is determined
appropriate by the Secretary, in order to--
(I) meet the immediate cash needs of the guaranty
agency;
(II) ensure the uninterrupted payment of claims; or
(III) ensure that the guaranty agency will make loans as
the lender-of-last-resort, in accordance with subsection (j)
of this section;

(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, to avoid disruption of the student loan program, and to
ensure an orderly transition from the loan programs under this
part to the direct student loan programs under part C of this
subchapter.

(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.
(J) Notwithstanding any other provision of law, the information
transmitted to the Secretary pursuant to this paragraph shall be
confidential and exempt from disclosure under section 552 of title
5, relating to freedom of information, or any other Federal law.
(K) The Secretary, within 3 months after the end of each fiscal
year, shall submit to the House Committee on Education and Labor and
the Senate Committee on Labor and Human Resources a report
specifying the Secretary's assessment of the fiscal soundness of the
guaranty agency system and the progress of the transition from the
loan programs under this part to the direct student loan programs
under part C of this subchapter.

(d) Usury laws inapplicable

No provision of any law of the United States (other than this
chapter) or of any State (other than a statute applicable principally to
such State's student loan insurance program) which limits the rate or
amount of interest payable on loans shall apply to a loan--
(1) which bears interest (exclusive of any premium for
insurance) on the unpaid principal balance at a rate not in excess
of the rate specified in this part; and
(2) which is insured (i) by the United States under this part,
or (ii) by a guaranty agency under a program covered by an agreement
made pursuant to subsection (b) of this section.

(e) Payments for lender referral services

(1) In general; agreements with guaranty agencies

(A) The Secretary shall make payments in accordance with this
paragraph to a guaranty agency with which the Secretary has an
agreement under subparagraph (B) which provides a lender referral
service for students who meet the requirements of paragraph (2).
(B)(i) The Secretary may enter into agreements with guaranty
agencies that meet standards established by the Secretary to provide
lender referral services in geographic areas specified by the
Secretary. Such guaranty agencies shall be paid in accordance with
paragraph (3) for such services.
(ii) The Secretary shall publish in the Federal Register
whatever standards, criteria, and procedures, consistent with the
provisions of this part and part C of this subchapter, the Secretary
determines are reasonable and necessary to provide lender referral
services under this subsection and ensure loan access to student and
parent borrowers during the transition from the loan programs under
this part to the direct student loan programs under part C of this
subchapter. Section 1232 \7\ of this title shall not apply to the
publication of such standards, criteria, and procedures.
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\7\ See References in Text note below.
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(2) Student eligibility

A student is eligible to apply for lender referral services to a
guaranty agency with which the Secretary has an agreement under
paragraph (1)(B) if--
(A) such student is either a resident of, or is accepted for
enrollment in, or is attending, an eligible institution located
in a geographic area for which the Secretary (i) determines that
loans are not available to all eligible students, and (ii) has
entered into an agreement with a guaranty agency under paragraph
(1)(B) to provide lender referral services; and
(B) such student has sought and was unable to find a lender
willing to make a loan under this part.

(3) Amount of payment

From funds available for costs of transition under section 1087h
of this title, the amount which the Secretary shall pay to any
eligible guaranty agency under this paragraph shall be equal to one-
half of 1 percent of the total principal amount of the loans (upon
which insurance was issued under this part) to a student described
in paragraph (2) who subsequently obtained such loans because of
such agency's referral service.

(4) Incentive fees to lenders

Nothing in this or any law shall prohibit an agency from using
all or any portion of the funds received under this part for the
payment of incentive fees to lenders who agree to participate in a
lender referral service.

(f) Payments of certain costs

(1) Payments based on insurance program agreement

(A) For a fiscal year prior to fiscal year 1994, the Secretary
shall make payments in accordance with the provisions of this
paragraph to any guaranty agency for the purposes of--
(i) the administrative cost of promotion of eligible lender
participation;
(ii) the administrative costs of collection of loans;
(iii) the administrative costs of preclaims assistance for
default prevention;
(iv) the administrative costs of monitoring the enrollment
and repayment status of students; or
(v) other such costs related to the student loan insurance
program subject to such agreement.

(B) The total amount of payments for any fiscal year prior to
fiscal year 1994 made under this paragraph shall be equal to 1
percent of the total principal amount of the loans upon which
insurance was issued under this part during such fiscal year by such
guaranty agency. The guaranty agency shall be deemed to have a
contractual right against the United States to receive payments
according to the provisions of this subparagraph. Payments shall be
made promptly and without administrative delay to any guaranty
agency submitting an accurate and complete application therefor
under this subparagraph.
(C) 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.

(2) Applications for payments

No payment may be made under paragraph (1) of this subsection
unless the guaranty agency submits to the Secretary an application
at such time, at least annually, in such manner, and containing or
accompanied by such information, as the Secretary may reasonably
require. Each such application shall--
(A) set forth assurances that the student loan insurance
program subject to the guaranty agreement complies with
subparagraphs (A), (B), (G), (R), (S), (T), and (U) of
subsection (b)(1) of this section;
(B) contain provisions designed to demonstrate the
capability of carrying out a necessary and successful program of
collection of and preclaim assistance for the loan program
subject to that agreement;
(C) set forth an estimate of the costs which are eligible
for payment under the provisions of this subsection;
(D) provide for such administrative and fiscal procedures,
including an audit, as are necessary to carry out the provisions
of this subsection; and
(E) set forth assurances that the guaranty agency will
furnish such data and information, including where necessary
estimates, as the Secretary may reasonably require, to carry out
the provisions of this subsection.

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

the Secretary shall consider and act upon such application within 180
days, and shall forthwith notify the Committee on Labor and Human
Resources of the Senate and the Committee on Education and Labor of the
House of Representatives of his actions.

(h) Lending by guaranty agencies

(1) Lending from Sallie Mae advances

From sums advanced by the Association pursuant to section 1087-
2(p) of this title, each guaranty agency or an eligible lender in a
State described in section 1085(d)(1)(D) or (F) of this title is
authorized to make loans directly to students otherwise unable to
obtain loans under this part.

(2) Amount of advances

(A) Each guaranty agency or an eligible lender in a State
described in section 1085(d)(1)(D) or (F) of this title which has an
application approved under section 1087-2(p)(2) of this title may
receive advances under section 1087-2(p) of this title for each
fiscal year in an amount necessary to meet the demand for loans
under this section. The amount such agency or lender is eligible to
receive may not exceed 25 percent of the average of the loans
guaranteed by that agency or lender for the 3 years preceding the
fiscal year for which the determination is made. Whenever the
determination required by the preceding sentence cannot be made
because the agency or lender does not have 3 years previous
experience, the amount such agency or lender is eligible to receive
may not exceed 25 percent of the loans guaranteed under a program of
a State of comparable size.
(B) Each guaranty agency and each eligible lender in a State
described in section 1085(d)(1)(D) or (F) of this title shall repay
advances made under section 1087-2(p) of this title in accordance
with agreements entered into between the Association and such agency
or lender.

(3) Loan term, conditions, and benefits

Loans made pursuant to this subsection shall have the same
terms, conditions, and benefits as all other loans made under this
part.

(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 21 days prior to the date of the disbursement of such
installment to such borrowers. Such agreement shall require the
lender to notify promptly the eligible institution when funds are
escrowed under this subsection for a student at such institution.

(2) Authority of escrow agent

Each escrow agent entering into an agreement under paragraph (1)
of this subsection is authorized to--
(A) make the disbursements in accordance with the note
evidencing the loan;
(B) commingle the proceeds of all loans paid to the escrow
agent pursuant to the escrow agreement entered into under such
paragraph (1);
(C) invest the proceeds of such loans in obligations of the
Federal Government or obligations which are insured or
guaranteed by the Federal Government;
(D) retain interest or other earnings on such investment;
and
(E) return to the lender undisbursed funds when the student
ceases to carry at an eligible institution at least one-half of
the normal full-time academic workload as determined by the
institution.

(j) Lenders-of-last-resort

(1) General requirement

In each State, the guaranty agency or an eligible lender in the
State described in section 1085(d)(1)(D) of this title shall make
loans directly, or through an agreement with an eligible lender or
lenders, to students eligible to receive interest benefits paid on
their behalf under subsection (a) of this section who are otherwise
unable to obtain loans under this part. Loans made under this
subsection shall not exceed the amount of the need of the borrower,
as determined under subsection (a)(2)(B) of this section, nor be
less than $200. The guaranty agency shall consider the request of
any eligible lender, as defined under section 1085(d)(1)(A) of this
title, to serve as the lender-of-last-resort pursuant to this
subsection.

(2) Rules and operating procedures

The guaranty agency shall develop rules and operating procedures
for the lender-of-last-resort program designed to ensure that--
(A) the program establishes operating hours and methods of
application designed to facilitate application by students and
ensure a response within 60 days after the student's original
complete application is filed under this subsection;
(B) consistent with standards established by the Secretary,
students applying for loans under this subsection shall not be
subject to additional eligibility requirements or requests for
additional information beyond what is required under this
subchapter and part C of subchapter I of chapter 34 of title 42
in order to receive a loan under this part from an eligible
lender, nor be required to receive more than two rejections from
eligible lenders in order to obtain a loan under this
subsection;
(C) information about the availability of loans under the
program is made available to institutions of higher education in
the State;
(D) appropriate steps are taken to ensure that borrowers
receiving loans under the program are appropriately counseled on
their loan obligation; and
(E) the guaranty agency notifies the Secretary when the
guaranty agency believes or has reason to believe that the
Secretary may need to exercise the Secretary's authority under
section 1087-2(q) of this title.

(3) Advances to guaranty agencies for lender-of-last-resort
services during transition to direct lending

(A) In order to ensure the availability of loan capital during
the transition from the Federal Family Education Loan Program under
this part to the Federal Direct Student Loan Program under part C of
this subchapter, the Secretary is authorized to provide a guaranty
agency with additional advance funds in accordance with section
1072(c)(7) of this title, with such restrictions on the use of such
funds as are determined appropriate by the Secretary, in order to
ensure that the guaranty agency will make loans as the lender-of-
last-resort. Such agency shall make such loans in accordance with
this subsection and the requirements of the Secretary.
(B) Notwithstanding any other provision in this part, a guaranty
agency serving as a lender-of-last-resort under this paragraph shall
be paid a fee, established by the Secretary, for making such loans
in lieu of interest and special allowance subsidies, and shall be
required to assign such loans to the Secretary on demand. Upon such
assignment, the portion of the advance represented by the loans
assigned shall be considered repaid by such guaranty agency.

(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.

(l) Preclaims assistance and supplemental preclaims assistance

(1) Assistance required

Upon receipt of a proper request from the lender, a guaranty
agency having an agreement with the Secretary under subsection (c)
of this section shall engage in preclaims assistance activities (as
described in subsection (c)(6)(C)(i)(I) of this section) and
supplemental preclaims assistance activities (as described in
subsection (c)(6)(C) of this section) with respect to each loan
covered by such agreement.

(2) Payments for supplemental preclaims assistance

The Secretary shall make payments in accordance with the
provisions of this paragraph to any guaranty agency that engages in
supplemental preclaims assistance (as defined in subsection
(c)(6)(C) of this section) on a loan guaranteed under this part. For
each loan on which such assistance is performed and for which a
default claim is not presented to the guaranty agency by the lender
on or before the 150th day after the loan becomes 120 days
delinquent, such payment shall be equal to one percent of the total
of the unpaid principal and the accrued unpaid interest of the loan.

(m) Income contingent repayment

(1) Authority of Secretary to require

The Secretary shall require at least 10 percent of the borrowers
who have defaulted on loans made under this part that are assigned
to the Secretary under subsection (c)(8) of this section to repay
those loans under an income contingent 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 C of this subchapter.

(2) Loans for which income contingent 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) of this
section.

(n) State share of default costs

(1) In general

In the case of any State in which there are located any
institutions of higher education that have a cohort default rate
that exceeds 20 percent, such State shall pay to the Secretary an
amount equal to--
(A) the new loan volume attributable to all institutions in
the State for the current fiscal year; multiplied by
(B) the percentage specified in paragraph (2); multiplied by
(C) the quotient of--
(i) the sum of the amounts calculated under paragraph
(3) for each such institution in the State; divided by
(ii) the total amount of loan volume attributable to
current and former students of institutions located in that
State entering repayment in the period used to calculate the
cohort default rate.

(2) Percentage

For purposes of paragraph (1)(B), the percentage used shall be--
(A) 12.5 percent for fiscal year 1995;
(B) 20 percent for fiscal year 1996; and
(C) 50 percent for fiscal year 1997 and succeeding fiscal
years.

(3) Calculation

For purposes of paragraph (1)(C)(i), the amount shall be
determined by calculating for each institution the amount by which--
(A) the amount of the loans received for attendance by such
institution's current and former students who (i) enter
repayment during the fiscal year used for the calculation of the
cohort default rate, and (ii) default before the end of the
following fiscal year; exceeds
(B) 20 percent of the loans received for attendance by all
the current and former students who enter repayment during the
fiscal year used for the calculation of the cohort default rate.

(4) Fee

A State may charge a fee to an institution of higher education
that participates in the program under this part and is located in
that State according to a fee structure, approved by the Secretary,
that is based on the institution's cohort default rate and the
State's risk of loss under this subsection. Such fee structure shall
include a process by which an institution with a high cohort default
rate is exempt from any fees under this paragraph if such
institution demonstrates to the satisfaction of the State that
exceptional mitigating circumstances, as determined by the State and
approved by the Secretary, contributed to its cohort default rate.

(Pub. L. 89-329, title IV, Sec. 428, as added Pub. L. 99-498, title IV,
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1367; amended Pub. L. 100-50,
Sec. 10(a)-(c), (e)-(m), June 3, 1987, 101 Stat. 341-343; Pub. L. 100-
203, title III, Secs. 3001(b), 3002(b), 3003, Dec. 22, 1987, 101 Stat.
1330-38, 1330-39; Pub. L. 100-369, Secs. 5(b)(2), 7(c), 11(a), July 18,
1988, 102 Stat. 836-838; Pub. L. 101-239, title II, Secs. 2002(a)(2),
(b)(1), 2004(b)(1), (3), 2006(b), Dec. 19, 1989, 103 Stat. 2111, 2116,
2118; Pub. L. 101-508, title III, Secs. 3002, 3004(b), Nov. 5, 1990, 104
Stat. 1388-25, 1388-27; Pub. L. 102-26, Sec. 9, Apr. 9, 1991, 105 Stat.
128; Pub. L. 102-164, title VI, Secs. 601(b), 602(b), 604, 605(b)(2),
Nov. 15, 1991, 105 Stat. 1065, 1066, 1068; Pub. L. 102-325, title IV,
Secs. 411(b)(2), 416(a)-(e)(1), (f)-(p)(7), (q)-(t), July 23, 1992, 106
Stat. 510, 516-525, 527-529; Pub. L. 103-66, title IV, Secs. 4041(a)(1),
(2)(B), (b), 4043(a), 4044, 4045, 4102(c), 4107(a), (b), 4108(a), (b),
4110(a), 4112(a), 4201(a), Aug. 10, 1993, 107 Stat. 354, 355, 358, 359,
367-370; Pub. L. 103-82, title I, Sec. 102(c)(1), Sept. 21, 1993, 107
Stat. 823; Pub. L. 103-208, Sec. 2(c)(11)-(28), Dec. 20, 1993, 107 Stat.
2462-2465; Pub. L. 103-382, title III, Sec. 355(a), Oct. 20, 1994, 108
Stat. 3967; Pub. L. 105-33, title VI, Secs. 6101(b), 6104(2), Aug. 5,
1997, 111 Stat. 652.)

References in Text

Section 1078-1 of this title, referred to in subsecs. (a)(2)(E) and
(b)(1)(B), (E)(i), (Q), (7)(C), was repealed by Pub. L. 103-66, title
IV, Sec. 4047(b)-(d), Aug. 10, 1993, 107 Stat. 364, eff. July 1, 1994,
except with respect to loans provided under that section as it existed
prior to Aug. 10, 1993.
This chapter, referred to in subsecs. (a)(6), (c)(9)(F)(iii), and
(d), was in the original ``this Act'', meaning Pub. L. 89-329, as
amended, known as the Higher Education Act of 1965. For complete
classification of this Act to the Code, see Short Title note set out
under section 1001 of this title and Tables.
The Higher Education Amendments of 1992, referred to in subsec.
(c)(3)(A)(i)(I), is Pub. L. 102-325, July 23, 1992, 106 Stat. 448, as
amended. For complete classification of this Act to the Code, see Short
Title of 1992 Amendment note set out under section 1001 of this title
and Tables.
The National and Community Service Trust Act of 1993, referred to in
subsec. (c)(3)(A)(i)(III), is Pub. L. 103-82, Sept. 21, 1993, 107 Stat.
785. For complete classification of this Act to the Code, see Short
Title of 1993 Amendment note set out under section 12501 of Title 42,
The Public Health and Welfare, and Tables.
Section 1232 of this title, referred to in subsec. (e)(1)(B)(ii),
was in the original a reference to section 431 of the General Education
Provisions Act. Sections 422 and 431 of that Act were renumbered as
sections 431 and 437, respectively, by Pub. L. 103-382, title II,
Sec. 212(b)(1), Oct. 20, 1994, 108 Stat. 3913, and are classified to
sections 1231a and 1232, respectively, of this title.

Codification

Amendments by section 2(c)(17), (26), (27) of Pub. L. 103-208 (which
were effective as if included in Pub. L. 102-325) were executed to this
section as amended by Pub. L. 102-325, Pub. L. 103-66, and Pub. L. 103-
82, to reflect the probable intent of Congress.


Prior Provisions

A prior section 1078, Pub. L. 89-329, title IV, Sec. 428, Nov. 8,
1965, 79 Stat. 1240; Pub. L. 90-460, Secs. 1(a)(2), 2(a)(2), (b)(1),
(2), 3(b), Aug. 3, 1968, 82 Stat. 634-636; Pub. L. 90-575, title I,
Secs. 111(a), (b)(1), 112(b), 113(b)(3), (4), 115(a)(1)-(3), (b),
116(b)(3), 117(a), (b), 120(a)(1), (b), (c)(1), Oct. 16, 1968, 82 Stat.
1020-1027; Pub. L. 92-318, title I, Secs. 132(b), 132A(b), 132C(a), (b),
132D(b)-(d), June 23, 1972, 86 Stat. 261-264; Pub. L. 93-269, Secs. 2-4,
Apr. 18, 1974, 88 Stat. 87, 89; Pub. L. 94-328, Sec. 2(b), June 30,
1976, 90 Stat. 727; Pub. L. 94-482, title I, Sec. 127(a), Oct. 12, 1976,
90 Stat. 2108; S. Res. 4, Feb. 4, 1977; Pub. L. 95-43, Sec. 1(a)(19)-
(29), June 15, 1977, 91 Stat. 214-216; Pub. L. 95-566, Sec. 5(a)(2),
(b)(1), (3)-(5), Nov. 1, 1978, 92 Stat. 2403; S. Res. 30, Mar. 7, 1979;
Pub. L. 96-49, Sec. 5(b), Aug. 13, 1979, 93 Stat. 352; Pub. L. 96-374,
title IV, Secs. 411(b), 412(c), (d), (f), 413(b), (d), 414, 415(a)(3)-
(5), (b)(2), 417, 423(a)(2), (b)-(d), title XIII, Sec. 1391(a)(1), (2),
Oct. 3, 1980, 94 Stat. 1416-1420, 1422, 1432, 1503; Pub. L. 97-35, title
V, Secs. 532(a), (b)(1), 535(c), (d), 536(b), 537(a)(1), (b)(2), (c),
(d)(1), (e)(2), Aug. 13, 1981, 95 Stat. 451, 452, 455-457; Pub. L. 98-
79, Sec. 10(b), Aug. 15, 1983, 97 Stat. 484; Pub. L. 99-272, title XVI,
Secs. 16012(b), 16013(a), (c), (e)(2), (3), 16014(a)(1), (b)(1), (2)
formerly (1), (3) formerly (2), 16015(b), 16016, 16018(a)(2), 16021,
16032(c), Apr. 7, 1986, 100 Stat. 340-343, 348, 349, 355, renumbered and
amended, Pub. L. 99-320, Sec. 2(a), (b), May 23, 1986, 100 Stat. 491,
related to Federal interest subsidy payments, prior to the general
revision of this part by Pub. L. 99-498.
A prior section 1078a, Pub. L. 91-95, Sec. 2, Oct. 22, 1969, 83
Stat. 141; Pub. L. 92-318, title I, Sec. 134(a), June 23, 1972, 86 Stat.
270; Pub. L. 93-269, Sec. 5, Apr. 18, 1974, 88 Stat. 89; Pub. L. 94-328,
Sec. 2(c), June 30, 1976, 90 Stat. 727; Pub. L. 94-482, title I,
Sec. 127(c)(1), Oct. 12, 1976, 90 Stat. 2142, related to special
allowances for insured student loans, prior to repeal by Pub. L. 94-482,
title I, Sec. 127(c)(2), Oct. 12, 1976, 90 Stat. 2142.


Amendments

1997--Subsec. (a)(5). Pub. L. 105-33, Sec. 6104(2), substituted
``September 30, 2002,'' for ``September 30, 1998,'' and ``September 30,
2006.'' for ``September 30, 2002.''
Subsec. (c)(9)(A). Pub. L. 105-33, Sec. 6101(b), struck out ``for
the fiscal year of the agency that begins in 1993'' after ``loans
guaranteed by such agency'' and struck out at end ``The minimum reserve
level shall increase to--
``(i) .7 percent of such total attributable amount for the
fiscal year of the agency that begins in 1994;
``(ii) .9 percent of such total attributable amount for the
fiscal year of the agency that begins in 1995; and
``(iii) 1.1 percent of such total attributable amount for each
fiscal year of the agency that begins on or after January 1, 1996.''
1994--Subsec. (c)(1)(G). Pub. L. 103-382 added subpar. (G).
1993--Subsec. (a)(2)(C)(i). Pub. L. 103-208, Sec. 2(c)(11),
substituted ``; and'' for period at end.
Subsec. (a)(2)(E). Pub. L. 103-208, Sec. 2(c)(12), inserted ``or
1078-8'' after ``1078-1''.
Subsec. (b)(1)(A)(ii), (iii). Pub. L. 103-208, Sec. 2(c)(13)(A),
added cls. (ii) and (iii) and struck out former cls. (ii) and (iii)
which read as follows:
``(ii) in the case of a student who has successfully completed such
first year but has not successfully completed the remainder of a program
of undergraduate study--
``(I) $3,500, if such student is enrolled in a program whose
length is at least one academic year in length (as determined under
section 1088 of this title);
``(II) $2,325, if such student is enrolled in a program whose
length is less than one academic year, but at least \2/3\ of such
academic year; and
``(III) $1,175, if such student is enrolled in a program whose
length is less than \2/3\, but at least \1/3\, of such academic
year;
``(iii) in the case of a student at an eligible institution who has
successfully completed such first and second year but has not
successfully completed the remainder of a program of undergraduate
study--
``(I) $5,500, if such student is enrolled in a program whose
length is at least one academic year in length (as determined under
section 1088 of this title);
``(II) $3,675, if such student is enrolled in a program whose
length is less than one academic year, but at least \2/3\ of such an
academic year; and
``(III) $1,825, if such student is enrolled in a program whose
length is less than \2/3\, but at least \1/3\, of such an academic
year; and''.
Subsec. (b)(1)(A)(iv), (v). Pub. L. 103-208, Sec. 2(c)(13)(B), (C),
added cl. (iv) and redesignated former cl. (iv) as (v).
Subsec. (b)(1)(B). Pub. L. 103-208, Sec. 2(c)(14), substituted a
semicolon for period at end of closing provisions.
Subsec. (b)(1)(D). Pub. L. 103-66, Sec. 4043(a)(1), substituted ``be
subject to income contingent repayment in accordance with subsection (m)
of this section;'' for ``be subject to repayment in accordance with the
regulations required by subsection (m) of this section if the Secretary
has published the finding required by paragraph (2) of such
subsection;''.
Subsec. (b)(1)(G). Pub. L. 103-66, Sec. 4108(b), substituted ``98
percent'' for ``100 percent'' and inserted before semicolon at end ``,
except that such program shall insure 100 percent of the unpaid
principal of loans made with funds advanced pursuant to subsection (j)
of this section or section 1087-2(q) of this title''.
Subsec. (b)(1)(H). Pub. L. 103-66, Sec. 4102(c), substituted ``1.0
percent'' for ``3 percent''.
Subsec. (b)(1)(N). Pub. L. 103-208, Sec. 2(c)(15), amended subpar.
(N) generally. Prior to amendment, subpar. (N) read as follows:
``provides that funds borrowed by a student are disbursed to the
institution by check or other means that is payable to and requires the
endorsement or other certification by such student, except nothing in
this subchapter and part C of subchapter I of chapter 34 of title 42
shall be interpreted to allow the Secretary to require checks to be made
co-payable to the institution and the borrower or to prohibit the
disbursement of loan proceeds by means other than by check and except in
the case of students who are studying outside the United States in a
program of study abroad that is approved for credit by the home
institution at which the student is enrolled, the funds shall, at the
request of the borrower, be delivered directly to the student and the
checks may be endorsed, and fund transfers authorized, pursuant to an
authorized power-of-attorney;''.
Subsec. (b)(1)(U). Pub. L. 103-208, Sec. 2(c)(16), inserted a comma
after ``emergency action'' in two places and substituted ``this clause''
for ``this clause;'' at end.
Subsec. (b)(1)(V). Pub. L. 103-208, Sec. 2(c)(17), redesignated
subpar. (X) as (V) and struck out former subpar. (V) which related to
procedure and requirements for granting a forbearance while a borrower
is enrolled in a medical or dental internship or residency program. See
Codification note above.
Subsec. (b)(1)(W). Pub. L. 103-208, Sec. 2(c)(17), redesignated
subpar. (Y) as (W) and struck out former subpar. (W) which read as
follows:
``(i) provides that, upon written request, a lender shall grant a
borrower forbearance on such terms as are otherwise consistent with the
regulations of the Secretary, during periods in which the borrower is
serving in a national service position, for which the borrower receives
a national service educational award under the National and Community
Service Trust Act of 1993;
``(ii) provides that clauses (iii) and (iv) of subparagraph (V)
shall also apply to a forbearance granted under this subparagraph; and
``(iii) provides that interest shall continue to accrue on a loan
for which a borrower receives forbearance under this subparagraph and
shall be capitalized or paid by the borrower;''. See Codification note
above.
Pub. L. 103-82, Sec. 102(c)(1)(A), added subpar. (W) and
redesignated former subpar. (W) as (X).
Subsec. (b)(1)(X). Pub. L. 103-208, Sec. 2(c)(17)(B), redesignated
subpar. (Z) as (X). Former subpar. (X) redesignated (V). See
Codification note above.
Pub. L. 103-82, Sec. 102(c)(1)(A)(i), redesignated subpar. (W) as
(X). Former subpar. (X) redesignated (Y).
Subsec. (b)(1)(Y). Pub. L. 103-208, Sec. 2(c)(17)(B), redesignated
subpar. (Y) as (W). See Codification note above.
Pub. L. 103-82, Sec. 102(c)(1)(A)(i), redesignated subpar. (X) as
(Y). Former subpar. (Y) redesignated (Z).
Subsec. (b)(1)(Z). Pub. L. 103-208, Sec. 2(c)(17)(B), redesignated
subpar. (Z) as (X). See Codification note above.
Pub. L. 103-82, Sec. 102(c)(1)(A)(i), redesignated subpar. (Y) as
(Z).
Subsec. (b)(2)(F)(i). Pub. L. 103-208, Sec. 2(c)(18), substituted
``either jointly or separately to provide a notice'' for ``each to
provide a separate notice''.
Subsec. (b)(2)(F)(ii). Pub. L. 103-208, Sec. 2(c)(19)-(21),
substituted ``transferee'' for ``transferor'' in introductory
provisions, struck out ``to another holder'' after ``the loan'' in
subcl. (I), and substituted ``the new'' for ``such other'' in subcl.
(II).
Subsec. (b)(7). Pub. L. 103-208, Sec. 2(c)(22), amended par. (7)
generally. Prior to amendment, par. (7) read as follows:
``(A) In the case of a loan made under section 1077 of this title or
this section, the repayment period shall begin on the day immediately
following the expiration of the 6-month period after the student ceases
to carry at least one-half the normal full-time academic workload as
determined by the institution, unless the borrower requests and is
granted a repayment schedule that provides for repayment to commence at
an earlier point in time, and shall exclude any period of authorized
deferment or forbearance.
``(B) In the case of a loan made under section 1078-1 or 1078-8 of
this title, the repayment period shall begin on the day the loan is
disbursed, or, if the loan is disbursed in multiple installments, on the
day of the last such disbursement, and shall exclude any period of
authorized deferment or forbearance.
``(C) In the case of a loan made under section 1078-2 or 1078-3 of
this title, the repayment period shall begin on the day the loan is
disbursed, and shall exclude any period of authorized deferment or
forbearance.''
Subsec. (b)(8). Pub. L. 103-208, Sec. 2(c)(23), added par. (8).
Subsec. (c)(1)(A). Pub. L. 103-208, Sec. 2(c)(24), substituted last
sentence for former last sentence which read as follows: ``In no case
shall a guaranty agency file a claim under this subsection for
reimbursement with respect to losses prior to 270 days after the loan
becomes delinquent with respect to any installment thereon, or later
than 45 days after the guaranty agency discharges its insurance
obligation on the loan.''
Pub. L. 103-66, Sec. 4108(a)(1), substituted ``98 percent'' for
``100 percent'' in fourth sentence.
Subsec. (c)(1)(B), (E), (F). Pub. L. 103-66, Sec. 4108(a)(2)-(4), in
subpar. (B), substituted ``88 percent'' for ``90 percent'' in cl. (i)
and ``78 percent'' for ``80 percent'' in cl. (ii), and added subpars.
(E) and (F).
Subsec. (c)(2)(G). Pub. L. 103-208, Sec. 2(c)(25), substituted
``certifies'' for ``demonstrates'' before ``to the Secretary''.
Subsec. (c)(3)(A). Pub. L. 103-208, Sec. 2(c)(26), added subpar. (A)
and struck out former subpar. (A) which read as follows: ``shall contain
provisions providing for forbearance in accordance with subparagraphs
(V) and (W) of subsection (b)(1) of this section for the benefit of the
student borrower serving in a medical or dental internship or residency
program;''. See Codification note above.
Pub. L. 103-82, Sec. 102(c)(1)(B), substituted ``subparagraphs (V)
and (W) of subsection (b)(1)'' for ``subsection (b)(1)(V)''.
Subsec. (c)(6)(A)(ii). Pub. L. 103-66, Sec. 4110(a), substituted
``27 percent'' for ``30 percent''.
Subsec. (c)(8). Pub. L. 103-66, Sec. 4044, designated existing
provisions as subpar. (A), struck out second and third sentences, and
added subpar. (B). Prior to amendment, second and third sentences read
as follows: ``Prior to making such determination for any guaranty
agency, the Secretary shall, in consultation with the guaranty agency,
develop criteria to determine whether such agency has made adequate
collections efforts. In determining whether a guaranty agency's
collection efforts have met such criteria, the Secretary shall consider
the agency's record of success in collecting on defaulted loans, the age
of the loans, and the amount of recent payments received on the loans.''
Subsec. (c)(9). Pub. L. 103-66, Sec. 4107(a), redesignated par. (10)
as (9) and struck out former par. (9) which required guaranty agencies
to pay reinsurance fees to the Secretary.
Subsec. (c)(10). Pub. L. 103-66, Sec. 4107(a)(2), redesignated par.
(10) as (9).
Subsec. (c)(10)(C). Pub. L. 103-66, Sec. 4045(1), inserted ``, as
appropriate,'' after ``the Secretary shall require''.
Subsec. (c)(10)(D). Pub. L. 103-66, Sec. 4045(2), designated
existing provisions as cl. (i), substituted ``If the Secretary is not
seeking to terminate the guaranty agency's agreement under subparagraph
(E), or assuming the guaranty agency's functions under subparagraph (F),
a'' for ``Each'', and added cl. (ii).
Subsec. (c)(10)(E)(iv) to (vi). Pub. L. 103-66, Sec. 4045(3), added
cls. (iv) to (vi).
Subsec. (c)(10)(F). Pub. L. 103-66, Sec. 4045(4)(A), substituted
``If a guaranty'' for ``Except as provided in subparagraph (G), if a
guaranty''.
Subsec. (c)(10)(F)(v). Pub. L. 103-66, Sec. 4045(4)(B), amended cl.
(v) generally. Prior to amendment, cl. (v) read as follows: ``provide
the guaranty agency with additional advance funds in accordance with
section 1072(c)(7) of this title in order to meet immediate cash needs
of the guaranty agency and ensure the uninterrupted payment of claims,
with such restrictions on the use of such funds, as determined
appropriate by the Secretary; or''.
Subsec. (c)(10)(F)(vi), (vii). Pub. L. 103-66, Sec. 4045(4)(C), (D),
in cl. (vi), substituted ``to avoid'' for ``and to avoid'' before
``disruption of the student'' and inserted before period at end ``, and
to ensure an orderly transition from the loan programs under this part
to the direct student loan programs under part C of this subchapter'',
redesignated cl. (vi) as (vii), and added new cl. (vi).
Subsec. (c)(10)(G). Pub. L. 103-66, Sec. 4045(5), (7), added subpar.
(G) and struck out former subpar. (G) which read as follows: ``The
Secretary may not take any action under subparagraph (E) or (F) against
any guaranty agency that is backed by the full faith and credit of the
State where such guaranty agency is the primary guarantor.''
Subsec. (c)(10)(H) to (J). Pub. L. 103-66, Sec. 4045(6), (7), added
subpar. (H) and redesignated former subpars. (H) and (I) as (I) and (J),
respectively. Former subpar. (J) redesignated (K).
Subsec. (c)(10)(K). Pub. L. 103-66, Sec. 4045(6), (8), redesignated
subpar. (J) as (K) and substituted ``system and the progress of the
transition from the loan programs under this part to the direct student
loan programs under part C of this subchapter.'' for ``system, together
with recommendations for legislative changes, if necessary, for the
maintenance of a strong guaranty agency system.''
Subsec. (e)(1). Pub. L. 103-66, Sec. 4041(b)(1), amended heading,
designated existing provisions as subpar. (A) and substituted ``with
which the Secretary has an agreement under subparagraph (B)'' for ``in
any State'', and added subpar. (B).
Subsec. (e)(2). Pub. L. 103-66, Sec. 4041(b)(2)(A), in introductory
provisions, substituted ``with which the Secretary has an agreement
under paragraph (1)(B)'' for ``in a State''.
Subsec. (e)(2)(A). Pub. L. 103-208, Sec. 2(c)(27), redesignated
former cl. (i), subcl. (I) as (i) and former cl. (i), subcl. (II) as
(ii) and struck out cl. (i) designation following subpar. (A)
designation. See Codification note above.
Pub. L. 103-66, Sec. 4041(b)(2)(B), amended subpar. (A) generally.
Prior to amendment, subpar. (A) read as follows: ``such student is
either a resident of such State or is accepted for enrollment in or is
attending an eligible institution in such State; and''.
Subsec. (e)(3). Pub. L. 103-66, Sec. 4041(b)(3), substituted ``From
funds available for costs of transition under section 1087h of this
title, the'' for ``The''.
Subsec. (e)(5). Pub. L. 103-66, Sec. 4041(b)(4), struck out par. (5)
which related to authorization of appropriations.
Subsec. (f)(1)(A). Pub. L. 103-66, Sec. 4107(b)(1), substituted
``For a fiscal year prior to fiscal year 1994, the Secretary'' for ``The
Secretary''.
Subsec. (f)(1)(B). Pub. L. 103-66, Sec. 4107(b)(2), inserted ``prior
to fiscal year 1994'' after ``any fiscal year''.
Subsec. (j)(2). Pub. L. 103-208, Sec. 2(c)(28), substituted
``lender-of-last-resort'' for ``lender of last resort'' in introductory
provisions.
Subsec. (j)(2)(A) to (E). Pub. L. 103-66, Sec. 4041(a)(2)(B), in
subpar. (A) inserted before semicolon ``and ensure a response within 60
days after the student's original complete application is filed under
this subsection'', added subpar. (B), and redesignated former subpars.
(B) to (D) as (C) to (E), respectively.
Subsec. (j)(3). Pub. L. 103-66, Sec. 4041(a)(1), added par. (3)
consisting of subpars. (A) and (B), and struck out former par. (3)
relating to limitation on lender-of-last-resort program, consisting of
subpars. (A) to (C).
Subsec. (l)(2). Pub. L. 103-66, Sec. 4112(a), inserted second
sentence and struck out former second sentence which read as follows:
``Such payments shall be equal to $50.00 for each loan on which such
assistance is performed and for which a default claim is not presented
to the guaranty agency by the lender on or before the 150th day after
the loan becomes 120 days delinquent.''
Subsec. (m). Pub. L. 103-66, Sec. 4043(a)(2), amended par. (1)
generally, added par. (2), and struck out former pars. (2) to (4). Prior
to amendment, former pars. (1) to (4) related to establishment of terms
and conditions, collection mechanism, loans for which income contingent
repayment is required, and additional authority, respectively.
Subsec. (n). Pub. L. 103-66, Sec. 4201(a), added subsec. (n).
1992--Subsec. (a)(2)(C). Pub. L. 102-325, Sec. 416(a)(1), amended
cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read
as follows:
``(i) a student's estimated financial assistance means, for the
period for which the loan is sought, the amount of assistance such
student will receive under subpart 1 of part A of this subchapter (as
determined in accordance with section 1091(b) of this title), subpart 2
of part A of this subchapter, part D of this subchapter, and part C of
subchapter I of chapter 34 of title 42, and any amount paid the student
under chapters 32, 34, and 35 of title 38, plus other scholarship,
grant, or loan assistance; and
``(ii) the determination of need and of the amount of a loan by an
eligible institution under subparagraph (B) with respect to a student
shall be calculated by subtracting from the estimated cost of attendance
at the eligible institution the total of the expected family
contribution with respect to such student plus any estimated financial
assistance reasonably available to such student.''
Subsec. (a)(3)(A)(v). Pub. L. 102-325, Sec. 416(a)(2), added cl.
(v).
Subsec. (a)(5). Pub. L. 102-325, Sec. 411(b)(2), substituted
``September 30, 1998'' for ``September 30, 1992'' and ``September 30,
2002'' for ``September 30, 1997''.
Subsec. (a)(7). Pub. L. 102-325, Sec. 416(a)(3), added par. (7).
Subsec. (b)(1)(A). Pub. L. 102-325, Sec. 416(b)(1)(A), inserted ``or
in a program of study abroad approved for credit by the eligible home
institution at which such student is enrolled'' in introductory
provisions.
Subsec. (b)(1)(A)(i) to (iv). Pub. L. 102-325, Sec. 416(b)(1)(B),
added cls. (i) to (iv) and struck out former cls. (i) to (iii) which
read as follows:
``(i) $2,625, in the case of a student who has not successfully
completed the first and second year of a program of undergraduate
education;
``(ii) $4,000, in the case of a student who has successfully
completed such first and second year but who has not successfully
completed the remainder of a program of undergraduate education; and
``(iii) $7,500, in the case of a graduate or professional student
(as defined in regulations of the Secretary);''.
Subsec. (b)(1)(B). Pub. L. 102-325, Sec. 416(b)(2), which directed
the amendment of subpar. (B) by striking clauses (i) and (ii) and
inserting language which contained new cls. (i) and (ii) followed by
concluding provisions, was executed by substituting the new cls. (i) and
(ii) and concluding provisions for former cls. (i) and (ii) and former
concluding provisions to reflect the probable intent of Congress. Prior
to amendment, cls. (i) and (ii) and concluding provisions read as
follows:
``(i) $17,250, in the case of any student who has not
successfully completed a program of undergraduate education,
excluding loans made under section 1078-1 or 1078-2 of this title;
and
``(ii) $54,750, in the case of any graduate or professional
student (as defined by regulations of the Secretary and including
any loans which are insured by the Secretary under this part, or by
a guaranty agency, made to such student before the student became a
graduate or professional student), excluding loans made under
section 1078-1 or 1078-2 of this title;
except that the Secretary may increase the limit applicable to students
who are pursuing programs which the Secretary determines are
exceptionally expensive;''.
Subsec. (b)(1)(D), (E). Pub. L. 102-325, Sec. 416(c)(1), amended
subpars. (D) and (E) generally. Prior to amendment, subpars. (D) and (E)
read as follows:
``(D) provides that (i) the student borrower shall be entitled to
accelerate without penalty the whole or any part of an insured loan,
(ii) except as provided in subparagraph (M) of this paragraph, the
repayment period of any insured loan may not exceed 10 years, and (iii)
the note or other written evidence of any loan, may contain such
reasonable provisions relating to repayment in the event of default by
the borrower as may be authorized by regulations of the Secretary in
effect at the time such note or written evidence was executed;
``(E) subject to subparagraphs (D) and (L) of this paragraph and
except as provided by subparagraph (M) of this paragraph, provides that
repayment of loans shall be in installments over a period of not less
than 5 years (unless the student, during the 6 months preceding the
start of the repayment period, specifically requests that repayment be
made over a shorter period) nor more than 10 years beginning 6 months
after the month in which the student ceases to carry at least one-half
the normal full-time academic workload as determined by the
institution;''.
Subsec. (b)(1)(L)(i). Pub. L. 102-325, Sec. 416(d), substituted
``(but in no instance less than the amount of interest due and
payable)'' for ``, except that, in the case of a husband and wife, both
of whom have such loans outstanding, the total of the combined payments
for such a couple during any year shall not be less than $600 or the
balance of all such loans, whichever is less''.
Subsec. (b)(1)(M). Pub. L. 102-325, Sec. 416(e)(1), amended subpar.
(M) generally, revising and restating as cls. (i) to (iii) provisions
formerly contained in cls. (i) to (xi).
Subsec. (b)(1)(N). Pub. L. 102-325, Sec. 416(f), substituted
``except in the case of students who are studying outside the United
States in a program of study abroad that is approved for credit by the
home institution at which the student is enrolled, the funds shall, at
the request of the borrower, be delivered directly to the student and
the checks may be endorsed, and fund transfers authorized, pursuant to
an authorized power-of-attorney;'' for ``except in the case of
attendance at an institution outside the United States, the funds shall
be delivered directly to the student;''.
Subsec. (b)(1)(T). Pub. L. 102-325, Sec. 416(g), amended subpar. (T)
generally. Prior to amendment, subpar. (T) read as follows: ``provides
no restrictions with respect to eligible institutions (other than
nonresidential correspondence schools) which are more onerous than
eligibility requirements for institutions under the Federal student loan
insurance program as in effect on January 1, 1985, unless--
``(i) that institution is ineligible under regulations for the
emergency action, limitation, suspension, or termination of eligible
institutions under the Federal student loan insurance program or is
ineligible pursuant to criteria issued under the student loan
insurance program which are substantially the same as regulations
with respect to such eligibility issued under the Federal student
loan insurance program; or
``(ii) there is a State constitutional prohibition affecting the
eligibility of such an institution;''.
Subsec. (b)(1)(U)(iii). Pub. L. 102-325, Sec. 416(h), added cl.
(iii).
Subsec. (b)(1)(V). Pub. L. 102-325, Sec. 416(i)(4), (5), added cls.
(ii) and (iii) and redesignated former cl. (ii) as (iv).
Pub. L. 102-325, Sec. 416(i)(3), which directed the amendment of cl.
(ii) by substituting a semicolon for a period at end, could not be
executed because the period had been stricken by Pub. L. 102-164,
Sec. 601(b)(2).
Pub. L. 102-325, Sec. 416(i)(1), (2), struck out ``and'' at end of
cl. (i) and inserted ``or (ii)'' after ``clause (i)'' in two places in
cl. (ii).
Subsec. (b)(1)(W) to (Y). Pub. L. 102-325, Sec. 416(j), added
subpars. (W) to (Y) and struck out former subpars. (W) and (X) which
related to credit reports, credit worthy cosigners, and authorizations
for entry of judgments against borrowers in the event of default.
Subsec. (b)(2)(C). Pub. L. 102-325, Sec. 416(k)(1), substituted ``,
including financial information, as the Secretary may reasonably require
to carry out the Secretary's functions under this part and protect the
financial interest of the United States,'' for ``, as the Secretary may
reasonably require to carry out the Secretary's functions under this
part,''.
Subsec. (b)(2)(D)(i). Pub. L. 102-325, Sec. 416(k)(2)(A),
substituted ``on at least an annual basis'' for ``at least once every 2
years''.
Subsec. (b)(2)(E). Pub. L. 102-325, Sec. 416(k)(3), designated
existing provisions as cl. (i) and added cl. (ii).
Subsec. (b)(2)(F). Pub. L. 102-325, Sec. 416(k)(2)(B), (4), added
subpar. (F).
Subsec. (b)(3)(B) to (D). Pub. L. 102-325, Sec. 416(l), added
subpar. (B) and redesignated former subpars. (B) and (C) as (C) and (D),
respectively.
Subsec. (b)(4). Pub. L. 102-325, Sec. 416(n), inserted at end
sentence relating to requests for deferment of repayment by students
engaged in fellowship-supported study outside the United States.
Pub. L. 102-325, Sec. 416(m), redesignated par. (5) as (4) and
struck out former par. (4) which related to targeted teacher deferment
rule.
Subsec. (b)(5). Pub. L. 102-325, Sec. 416(m)(2), redesignated par.
(6) as (5). Former par. (5) redesignated (4).
Subsec. (b)(6). Pub. L. 102-325, Sec. 416(o), added par. (6). Former
par. (6) redesignated (5).
Subsec. (b)(7). Pub. L. 102-325, Sec. 416(c)(2), added par. (7).
Subsec. (c)(1)(A). Pub. L. 102-325, Sec. 416(p)(1), substituted ``,
or later than 45 days after the guaranty agency discharges its insurance
obligation on the loan.'' for period at end.
Subsec. (c)(1)(D). Pub. L. 102-325, Sec. 416(p)(2), added subpar.
(D).
Subsec. (c)(2). Pub. L. 102-325, Sec. 416(p)(3), struck out ``and''
at end of subpar. (F), added subpars. (G) and (H), and redesignated
former subpar. (G) as (I).
Subsec. (c)(3). Pub. L. 102-325, Sec. 416(p)(4), added subpar. (C)
and concluding provisions and struck out former last sentence which read
as follows: ``Such regulations shall not preclude guaranty agencies from
permitting the parties to such a loan from entering into a forbearance
agreement solely because the loan is in default.''
Subsec. (c)(7)(A). Pub. L. 102-325, Sec. 416(p)(5)(A), substituted
``(1)(C)'' for ``(1)(B)'' in introductory provisions and inserted ``and
ends before October 1, 1991'' in cl. (i).
Subsec. (c)(7)(B). Pub. L. 102-325, Sec. 416(p)(5)(D), added subpar.
(B). Former subpar. (B) redesignated (C).
Subsec. (c)(7)(C). Pub. L. 102-325, Sec. 416(p)(5)(B), (C),
redesignated subpar. (B) as (C) and inserted ``or (B)'' after ``(A)''.
Subsec. (c)(8). Pub. L. 102-325, Sec. 416(p)(6), inserted provisions
at end directing Secretary to develop criteria to determine whether
agency has made adequate collection efforts and directing Secretary to
consider certain factors in making determination.
Subsec. (c)(10). Pub. L. 102-325, Sec. 416(p)(7), added par. (10).
Subsec. (f)(1)(A)(i). Pub. L. 102-325, Sec. 416(q)(1), substituted
``eligible lender'' for ``commercial lender''.
Subsec. (f)(1)(C). Pub. L. 102-325, Sec. 416(q)(2), added subpar.
(C).
Subsec. (j). Pub. L. 102-325, Sec. 416(r), designated existing
provisions as par. (1), inserted par. heading, and added pars. (2) and
(3).
Subsec. (k)(3). Pub. L. 102-325, Sec. 416(s), added par. (3).
Subsec. (m). Pub. L. 102-325, Sec. 416(t), added subsec. (m).
1991--Subsec. (a)(2)(A)(iii). Pub. L. 102-164, Sec. 602(b)(1), added
cl. (iii).
Subsec. (a)(2)(F). Pub. L. 102-26 amended subpar. (F) generally.
Prior to amendment, subpar. (F) read as follows: ``Except as provided in
subparagraph (D), an eligible institution may not, in carrying out the
provisions of subparagraphs (A) and (B) of this paragraph, refuse to
provide to any eligible lender which has an agreement under subsection
(b) of this section with any guaranty agency, a statement which permits
a student to receive any loan under this part, except that, in
individual cases where the institution determines that the portion of
the student's expenses to be covered by the loan can be met more
appropriately, either by the institution or directly by the student,
from other sources, the institution may refuse to provide such statement
or may reduce the determination of need contained in such statement.''
Subsec. (b)(1)(W). Pub. L. 102-164, Sec. 601(b), added subpar. (W).
Subsec. (b)(1)(X). Pub. L. 102-164, Sec. 604, added subpar. (X).
Subsec. (c)(6)(D). Pub. L. 102-164, Sec. 605(b)(2), struck out
subpar. (D) which read as follows: ``In the case of a State which enacts
and enforces a garnishment law that complies with the requirements of
section 1078-5 of this title, subparagraph (A)(ii) shall be applied by
substituting `35 percent' for `30 percent'.''
1990--Subsec. (a)(2)(F). Pub. L. 101-508, Sec. 3004(b), inserted
before period at end ``, except that, in individual cases where the
institution determines that the portion of the student's expenses to be
covered by the loan can be met more appropriately, either by the
institution or directly by the student, from other sources, the
institution may refuse to provide such statement or may reduce the
determination of need contained in such statement''.
Subsec. (c)(1)(A). Pub. L. 101-508, Sec. 3002(a)(1), struck out
before period at end of first sentence ``, including the administrative
costs of supplemental preclaim assistance for default prevention as
defined in paragraph (6)(C)''.
Subsec. (c)(6)(C). Pub. L. 101-508, Sec. 3002(a)(2)-(5), in
introductory provisions of cl. (i), substituted ``subsection (l) of this
section'' for ``this paragraph'', in cl. (i)(I), substituted ``generally
comparable in intensiveness to the level of preclaims assistance
performed, prior to the 120th day of delinquency, by the guaranty agency
as of October 16, 1990'' for ``required or permitted under paragraph
(2)(A) of this subsection and subsection (f) of this section'', in cl.
(ii), substituted ``payment under subsection (l) of this section'' for
``reimbursement'' and ``described in division (i)(I) of this
subparagraph'' for ``which the guaranty agency is required or permitted
to provide pursuant to paragraph (2)(A) of this subsection and
subsection (f) of this section'', and in cl. (iv), struck out first
sentence which read as follows: ``The costs for each delinquent loan
associated with carrying out this subparagraph may not exceed 2 percent
of the outstanding principal balance of each such loan subject to the
supplemental preclaims assistance authorized by this subparagraph or
$100, whichever is less.''
Subsec. (l). Pub. L. 101-508, Sec. 3002(b), added subsec. (l).
1989--Subsec. (a)(2)(A)(i)(III). Pub. L. 101-239, Sec. 2004(b)(1),
added subcl. (III).
Subsec. (b)(1)(M)(i). Pub. L. 101-239, Sec. 2002(a)(2), inserted
before semicolon at end ``, except that no borrower shall be eligible
for a deferment under this clause, or loan made under this part (other
than a loan made under section 1078-2 or 1078-3 of this title), while
serving in a medical internship or residency program''.
Subsec. (b)(1)(O). Pub. L. 101-239, Sec. 2004(b)(3), amended subpar.
(O) generally, substituting requirement that student loans be disbursed
in accordance with section 1078-7 of this title for provisions requiring
that certain loans be disbursed directly by lender in 2 or more
installments, none exceeding more than one-half of the loan, or in
installments pursuant to escrow provisions in subsec. (i).
Subsec. (b)(1)(T)(i). Pub. L. 101-239, Sec. 2006(b)(1), inserted
``emergency action,'' after ``regulations for the''.
Subsec. (b)(1)(U). Pub. L. 101-239, Sec. 2006(b), in cl. (i)
inserted ``emergency action,'' after ``regulations for the'', and in cl.
(ii) inserted ``take emergency action,'' after ``such program to''.
Subsec. (b)(1)(V). Pub. L. 101-239, Sec. 2002(b)(1)(A), added
subpar. (V).
Subsec. (c)(3). Pub. L. 101-239, Sec. 2002(b)(1)(B), amended par.
(3) generally. Prior to amendment, par. (3) read as follows: ``To the
extent provided in regulations of the Secretary, a guaranty agreement
under this subsection may contain provisions which permit such
forbearance for the benefit of the student borrower as may be agreed
upon by the parties to an insured loan and approved by the insurer. Such
regulations shall not preclude guaranty agencies from permitting the
parties to such a loan from entering into a forbearance agreement solely
because the loan is in default.''
1988--Subsec. (b)(1)(M)(v). Pub. L. 100-369, Sec. 7(c), substituted
``Internal Revenue Code of 1986'' for ``Internal Revenue Code of 1954'',
which for purposes of codification was translated as ``title 26'' thus
requiring no change in text.
Subsec. (b)(1)(M)(vii). Pub. L. 100-369, Sec. 11(a), inserted
``after January 1, 1986,'' after ``service''.
Subsec. (b)(1)(O). Pub. L. 100-369, Sec. 5(b)(2), substituted
``section 1078-2 or 1078-3'' for ``section 1078-1, 1078-2, or 1078-3''.
1987--Subsec. (a)(2)(D). Pub. L. 100-50, Sec. 10(e), substituted
``certifies the eligibility of any student'' for ``permits the
student''.
Subsec. (b)(1)(A)(i). Pub. L. 100-50, Sec. 10(f)(1), substituted
``first and'' for ``first or''.
Subsec. (b)(1)(B)(i). Pub. L. 100-50, Sec. 10(a)(1), inserted ``,
excluding loans made under section 1078-1 or 1078-2 of this title''
after ``undergraduate education''.
Subsec. (b)(1)(B)(ii). Pub. L. 100-50, Sec. 10(a)(2), inserted ``,
excluding loans made under section 1078-1 or 1078-2 of this title''
after ``graduate or professional student)''.
Subsec. (b)(1)(M)(vi). Pub. L. 100-50, Sec. 10(b)(1), inserted
``nonprofit'' before ``private''.
Subsec. (b)(1)(M)(vii). Pub. L. 100-50, Sec. 10(b)(2), inserted ``or
serving in an internship or residency program leading to a degree or
certificate awarded by an institution of higher education, a hospital,
or a health care facility that offers postgraduate training'' before
semicolon at end.
Subsec. (b)(1)(N). Pub. L. 100-50, Sec. 10(f)(2), inserted ``and
except in the case of attendance at an institution outside the United
States, the funds shall be delivered directly to the student'' before
semicolon at end.
Subsec. (b)(1)(O). Pub. L. 100-50, Sec. 10(c), substituted ``$1,000
or more'' for ``more than $1,000''.
Subsec. (b)(1)(O)(i). Pub. L. 100-50, Sec. 10(f)(3), substituted
``being disbursed'' for ``being dispensed''.
Subsec. (b)(1)(P). Pub. L. 100-50, Sec. 10(f)(4), added subpar. (P)
and struck out former subpar. (P) which read as follows: ``requires the
borrower and the institution at which the borrower is in attendance to
promptly notify the holder of the loan, directly or through the guaranty
agency, concerning any change of address or status;''.
Subsec. (b)(1)(T). Pub. L. 100-50, Sec. 10(f)(5), inserted ``(other
than nonresidential correspondence schools)'' after ``eligible
institutions''.
Subsec. (b)(5). Pub. L. 100-50, Sec. 10(g), substituted ``paragraph
(1)(M)(i)(III)'' for ``paragraph (1)(M)''.
Subsec. (b)(6)(A). Pub. L. 100-50, Sec. 10(h)(1), substituted
``Until such time as the Secretary has implemented section 1092b of this
title and is able to provide to guaranty agencies the information
required by such section'' for ``Prior to the implementation of section
1092b of this title''.
Subsec. (b)(6)(B)(ii). Pub. L. 100-50, Sec. 10(h)(2), added cl. (ii)
and struck out former cl. (ii) which read as follows: ``the amount
borrowed, the cumulative amount borrowed, the income reported on the
loan application, and the purposes and the cost of attendance of the
borrower.''
Subsec. (c)(1)(A). Pub. L. 100-203, Sec. 3002(b)(1), substituted
``shall be deemed'' for ``shall, subject to section 1072(e) of this
title, be deemed''.
Pub. L. 100-203, Sec. 3001(b)(1), substituted ``shall, subject to
section 1072(e) of this title, be deemed'' for ``shall be deemed''.
Subsec. (c)(6)(C)(iv). Pub. L. 100-50, Sec. 10(i), inserted at end
``In the case of accounts brought into repayment status as a result of
performing supplemental preclaims assistance, the cost of such
assistance is a permissible charge to the borrower (for the cost of
collection) for which the borrower shall be liable.''
Subsec. (c)(6)(D). Pub. L. 100-50, Sec. 10(j), inserted ``and
enforces'' after ``enacts''.
Subsec. (c)(9)(A). Pub. L. 100-203, Sec. 3002(b)(2), substituted
``an amount equal to'' for ``an amount, subject to section 1072(e) of
this title, equal to'' in introductory provisions.
Pub. L. 100-203, Sec. 3001(b)(2), substituted ``an amount, subject
to section 1072(e) of this title, equal to'' for ``an amount equal to''
in introductory provisions.
Subsec. (c)(9)(A)(i), (ii). Pub. L. 100-50, Sec. 10(k)(1), inserted
``covered'' before ``loans''.
Subsec. (c)(9)(D). Pub. L. 100-50, Sec. 10(k)(2), added subpar. (D).
Subsec. (f)(1)(B). Pub. L. 100-203, Sec. 3002(b)(3), substituted
``shall be deemed'' for ``shall, subject to section 1072(e) of this
title, be deemed''.
Pub. L. 100-203, Sec. 3001(b)(3), substituted ``shall, subject to
section 1072(e) of this title, be deemed'' for ``shall be deemed''.
Subsec. (i)(1). Pub. L. 100-50, Sec. 10(l), struck out ``multiple''
after ``authorizing'' and substituted ``21 days'' for ``45 days''.
Subsec. (j). Pub. L. 100-50, Sec. 10(m), inserted provision at end
that the guaranty agency consider the request of an eligible lender to
serve as the lender-of-last-resort pursuant to this subsection.
Subsec. (k)(1). Pub. L. 100-203, Sec. 3003, substituted
``Notwithstanding any other provision of law, in'' for ``In'',
``guaranty agency shall'' for ``guaranty agency may'', and ``subsection
shall include'' for ``subsection may include''.

Change of Name

Committee on Education and Labor of House of Representatives treated
as referring to Committee on Economic and Educational Opportunities of
House of Representatives by section 1(a) of Pub. L. 104-14, set out as a
note preceding section 21 of Title 2, The Congress. Committee on
Economic and Educational Opportunities of House of Representatives
changed to Committee on Education and the Workforce of House of
Representatives by House Resolution No. 5, One Hundred Fifth Congress,
Jan. 7, 1997.


Effective Date of 1994 Amendment

Section 355(b) of Pub. L. 103-382 provided that: ``Subsection (a)
[amending this section] and the amendment made by subsection (a) shall
take effect on August 10, 1993.''


Effective Date of 1993 Amendments

Amendment by section 2(c)(11), (12), (14)-(17), (22)-(28) of Pub. L.
103-208 effective as if included in the Higher Education Amendments of
1992, Pub. L. 102-325, except as otherwise provided, amendment by
section 2(c)(13)(A) of Pub. L. 103-208 effective on and after July 1,
1994, amendment by section 2(c)(13)(B), (C) and (18) of Pub. L. 103-208
effective on and after Dec. 20, 1993, and amendment by section 2(c)(19)-
(21) of Pub. L. 103-208 effective on and after 30 days after Dec. 20,
1993, see section 5(a), (b)(2), (3), (6) of Pub. L. 103-208, set out as
a note under section 1003 of this title.
Amendment by Pub. L. 103-82 effective Oct. 1, 1993, see section 123
of Pub. L. 103-82, set out as a note under section 1701 of Title 16,
Conservation.
Section 4043(b) of Pub. L. 103-66 provided that: ``The amendments
made by this section [amending this section] shall take effect on July
1, 1994.''
Section 4102(d) of Pub. L. 103-66 provided that: ``The amendments
made by this section [amending this section and sections 1078-8 and
1087-1 of this title] shall take effect on July 1, 1994.''
Section 4107(c) of Pub. L. 103-66 provided that: ``The amendments
made by this section [amending this section] shall take effect on
October 1, 1993.''
Section 4108(c) of Pub. L. 103-66 provided that: ``The amendments
made by this section [amending this section] shall apply to any loan for
which the first disbursement is made on or after October 1, 1993.''
Section 4110(b) of Pub. L. 103-66 provided that: ``The amendment
made by subsection (a) [amending this section] shall take effect on
October 1, 1993.''
Section 4112(b) of Pub. L. 103-66 provided that: ``The amendment
made by this section [amending this section] shall take effect on
October 1, 1993.''
Section 4201(b) of Pub. L. 103-66 provided that: ``The amendment
made by this section [amending this section] shall take effect on
October 1, 1994.''


Effective Date of 1992 Amendment

Section 432 of Pub. L. 102-325, as amended by Pub. L. 103-208,
Sec. 2(k)(5), Dec. 20, 1993, 107 Stat. 2486, provided that:
``(a) In General.--The changes made in part B of title IV of the Act
[20 U.S.C. 1071 et seq.] by the amendments made by this part [part B
(Secs. 411-432) of title IV of Pub. L. 102-325, see Tables for
classification] shall take effect on the date of enactment of this Act
[July 23, 1992], except--
``(1) as otherwise provided in such part B;
``(2) that the changes made in sections 425(a), 428(b)(1)(A),
428(b)(1)(B), 428A(b), 428B(b) [20 U.S.C. 1075(a), 1078(b)(1)(A),
(B), 1078-1(b), 1078-2(b)], relating to annual and aggregate loan
limits, shall apply with respect to loans for which the first
disbursement is made on or after July 1, 1993, except that--
``(A) the changes made in section 425(a)(1)(A)(i) and
428(b)(1)(A)(i) shall apply with respect to loans for which the
first disbursement is made on or after October 1, 1992; and
``(B) the changes made in section 425(a)(1)(A)(iv) and
428(b)(1)(A)(iv) shall apply with respect to loans to cover the
costs of instruction for periods of enrollment beginning on or
after October 1, 1993;
``(3) that the changes made in sections 427(a)(2)(C),
428(b)(1)(M), and 428B(d)(1) [20 U.S.C. 1077(a)(2)(C),
1078(b)(1)(M), 1078-2(d)(1)], relating to deferments, shall apply
with respect to loans for which the first disbursement is made on or
after July 1, 1993, to an individual who is a new borrower on the
date such individual applies for a loan;
``(4) that the changes made in sections 428(a)(7) and
428(f)(1)(C), relating to payments for unconsummated loans, shall
apply with respect to loans made on or after October 1, 1992;
``(5) that the changes made in sections 427(a)(2)(H) and
428(b)(1)(E)(i), relating to offering graduated or income sensitive
repayment options, shall apply with respect to loans for which the
first disbursement is made on or after July 1, 1993, to an
individual who is a new borrower on the date such individual applies
for a loan;
``(6) that the changes made in section 428(b)(4), relating to
teacher deferment, shall apply with respect to loans for which the
first disbursement is made on or after July 1, 1993, to an
individual who is a new borrower on the date such individual applies
for a loan;
``(7) that section 428(c)(2)(H)(i) as added by such amendments
shall be effective on and after October 1, 1992;
``(8) that the changes in section 428(c)(3) with respect to
forbearance after a default shall be effective on and after October
1, 1992;
``(9) that the changes made in section 428B(a) [20 U.S.C. 1078-
2(a)] with respect to use of credit histories shall apply with
respect to loans for which the first disbursement is made on or
after July 1, 1993;
``(10) that section 428B(c) as added by such amendments,
relating to disbursement of Federal PLUS Loans, shall apply with
respect to loans for which the first disbursement is made on or
after October 1, 1992;
``(11) that the changes made in section 428C [20 U.S.C. 1078-3],
relating to consolidation loans, shall apply with respect to loans
under such section for which the application is received by an
eligible lender on or after January 1, 1993;
``(12) that section 428H [20 U.S.C. 1078-8] as added by such
amendments shall be effective with respect to loans made to cover
the cost of instruction for periods of enrollment beginning on or
after October 1, 1992;
``(13) that the changes made in section 438 [20 U.S.C. 1087-1]
shall apply with respect to loans for which the first disbursement
is made on or after October 1, 1992;
``(14) that the changes in section 439(d)(1) [20 U.S.C. 1087-
2(d)(1)], relating to facilities loans, shall apply with respect to
applications received on or after July 1, 1992; and
``(15) that the changes in the designation or names of loans or
programs under part B is [sic] effective with respect to
applications or other documents (used in making such loans) that are
printed after the date of enactment of this Act.
``(b) New Borrowers.--For purposes of the section, the term `new
borrower' means, with respect to any date, an individual who on that
date has no outstanding balance of principal or interest owing on any
loan made, insured, or guaranteed under part B of title IV of the Act
[20 U.S.C. 1071 et seq.].''


Effective Date of 1989 Amendment

Amendment by section 2002(a)(2) of Pub. L. 101-239 applicable to any
loan made, insured, or guaranteed under this part or part D of this
subchapter, including a loan made before Dec. 19, 1989, and amendment
effective Jan. 1, 1990, but inapplicable with respect to any portion of
a period of deferment granted to a borrower under section
1077(a)(2)(C)(i), 1078(b)(1)(M)(i), or 1087dd(c)(2)(A)(i) of this title
for service in a medical internship or residency program completed prior
to Dec. 19, 1989, see section 2002(a)(4) of Pub. L. 101-239, set out as
a note under section 1077 of this title.
Section 2002(b)(2) of Pub. L. 101-239 provided that: ``The
amendments made by this subsection [amending this section] shall apply
with respect to loans made before, on, or after the date of enactment of
this Act [Dec. 19, 1989].''
Amendment by section 2004(b)(1), (3) of Pub. L. 101-239 applicable
with respect to loans made to cover the cost of instruction for periods
of enrollment beginning on or after Jan. 1, 1990, see section 2004(c) of
Pub. L. 101-239, set out as a note under section 1077 of this title.


Effective Date of 1988 Amendment

Amendment by section 11(a) of Pub. L. 100-369 applicable with
respect to loans made, insured or guaranteed under this part on, before,
or after June 3, 1987, see section 11(b) of Pub. L. 100-369, set out as
a note under section 1077 of this title.
Amendment by section 5(b)(2) of Pub. L. 100-369 effective with
respect to loans made on or after Oct. 1, 1988, and amendment by section
7(c) of Pub. L. 100-369 effective July 18, 1988, see section 13(b) of
Pub. L. 100-369, set out as a note under section 1091 of this title.


Effective Date of 1987 Amendments

Section 3002(b)(1)-(3) of Pub. L. 100-203 provided in part that the
amendments by section 3002(b)(1)-(3) of Pub. L. 100-203 are effective
Sept. 30, 1989.
Amendment by section 10(b) of Pub. L. 100-50 applicable with respect
to loans made, insured or guaranteed under this part on, before, or
after June 3, 1987, see section 11(b) of Pub. L. 100-369, set out as an
Effective Date of 1988 Amendment note under section 1077 of this title.
Amendment by Pub. L. 100-50 effective as if enacted as part of the
Higher Education Amendments of 1986, Pub. L. 99-498, see section 27 of
Pub. L. 100-50, set out as a note under section 1001 of this title.


Effective Date

Section effective Oct. 17, 1987, with subsection (b)(1)(M) (except
cls. (viii), (ix), and (x)) applicable only to loans to new borrowers
made to cover the costs of instruction for periods of enrollment
beginning on or after July 1, 1987, or disbursed on or after July 1,
1987, subsection (b)(1)(A) and (B) applicable with respect only to loans
disbursed on or after Jan. 1, 1987, or made to cover the costs of
instruction for periods of enrollment beginning on or after Jan. 1,
1987, and subsection (b)(1)(H) applicable with respect only to loans for
which the borrower files an application on or after July 1, 1987, see
section 402(b) of Pub. L. 99-498, set out as a note under section 1071
of this title.


Guaranteed Student Loan Family Contribution Schedule for the Periods of
Instruction Beginning After June 30, 1983

Pub. L. 97-301, Sec. 9, Oct. 13, 1982, 96 Stat. 1403, as amended by
Pub. L. 98-79, Sec. 4(b), Aug. 15, 1983, 97 Stat. 481; Pub. L. 98-511,
title VII, Sec. 707(7), (8), Oct. 19, 1984, 98 Stat. 2407, 2408; Pub. L.
99-272, title XVI, Sec. 16018(b), Apr. 7, 1986, 100 Stat. 348; Pub. L.
99-498, title IV, Sec. 408(a)(6), (7), Oct. 17, 1986, 100 Stat. 1495,
specified that the family contribution schedule for specific periods of
instruction through June 30, 1988, for loans made, insured, or
guaranteed under this part be the family contribution schedule for such
loans for the period of instruction from July 1, 1982, through June 30,
1983, and required the family contribution schedule for the period of
instruction from July 1, 1982, through June 30, 1983, to be modified by
the Secretary of Education for use for each of the specific periods of
instruction to reflect the most recent and relevant data, prior to
repeal by Pub. L. 99-498, title IV, Sec. 408(b), Oct. 17, 1986, 100
Stat. 1495, effective with respect to any academic year beginning on or
after July 1, 1988, Pub. L. 97-301.

Section Referred to in Other Sections

This section is referred to in sections 1058, 1071, 1072, 1073,
1077a, 1078-2, 1078-3, 1078-6, 1078-7, 1078-8, 1080, 1080a, 1081, 1082,
1084, 1085, 1087, 1087-1, 1087-2, 1087a, 1087c, 1087e, 1087f, 1087h,
1091, 1091a, 1092, 1094, 1095a, 1099a-1, 1099a-3, 1104b of this title;
title 16 section 1727; title 42 section 12656.


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This page was last updated on November 13, 2000

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